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VOL. 129 | NO. 166 | Tuesday, August 26, 2014

Shelby County New-Home Permits Drop 7.8 Percent in July

By Amos Maki

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(Daily News File/Andrew J. Breig)

The local homebuilding industry can still mystify a veteran builder and developer like David Goodwin Jr.

Goodwin and other homebuilders expected 2014 to be a healthy year for the industry, especially entering the spring and early summer.

“I think there were great expectations for the spring market, and that never materialized,” said Goodwin, owner of the David Goodwin Jr. Cos. LLC and next president of the West Tennessee Homebuilders Association. “In my little world, we’re behind where we were last year. We really thought this would be the breakout year, but it just hasn’t happened.”

Shelby County homebuilding continued to surprise in July, with builders filing fewer permits than a year ago but selling more homes. Meanwhile, the number of Shelby County permits pulled by builders and the number of new homes sold through July remain less than last year’s levels.

Builders filed 71 permits in Shelby County in July, down 7.8 percent from 77 permits in July 2013 and far below June’s pace, when builders pulled 106 permits, according to real estate information company Chandler Reports, chandlerreports.com.

The average July permit measured 3,306 square feet and $304,154, compared to 3,049 square feet and $231,093 in July 2013.

Goodwin said the primary drag on permit activity is a dwindling supply of developed lots in prime locations. Without lots available, builders can’t construct new homes.

Banks, still feeling the burn of the housing crash and recession, have not yet opened up to the idea of financing lot development, and developers, who may have grown accustomed to acquiring cheap bank-owned lots after the crash, have found it difficult to make the economics of lot development work, Goodwin said.

“From my perspective, the banks are still a little behind the curve and the numbers are just now starting to make sense from a developer’s standpoint,” he said. “Builders are so desperate for lots they’re turning to developing them themselves, which can be tricky because it’s so capital-intensive.”

The top homebuilder in July, as tracked by the number of permits, was Regency Homebuilders LLC (21, averaging 3,027 square feet and $232,194). Magnolia Homes by Karen Garner recorded the second-highest number of permits (seven, averaging 4,121 square feet and $454,243), and Roger Kelly came in third (five, averaging 1,915 square feet and $130,000).

The ZIP code recording the most permits was Collierville’s 38017 (19, averaging 3,732 square feet and $376,233). The 38135 ZIP code covering Bartlett/Ellendale was second (11, averaging 2,320 square feet and $172,726), and Arlington’s 38002 ZIP code was third (eight, averaging 3,409 square feet and $212,072).

The Fountain Brook subdivision in Cordova North’s 38016 ZIP code recorded the most permits (seven, averaging 3,002 square feet and $208,029). The Wolf River Ranch subdivision in Collierville was second (six, averaging 4,141 square feet and $438,167). The Windsor Park subdivision in Bartlett/Brunswick’s 38133 ZIP and the Enclave Planned Development in Germantown East’s 38139 each recorded five permits.

Year to date through July, homebuilders pulled 522 permits averaging 3,056 square feet and $248,082. That’s down 14.2 percent from 609 permits averaging 3,175 square feet and $250,380 through July 2013.

Goodwin said that when builders hike sale prices as the inventory of new homes drops, there is concern that some potential new homebuyers could be priced out of the market.

“It’s quite a quandary we’re in at the moment,” said Goodwin.

Homebuilders sold 83 homes in July, down slightly from 85 in June but up 14 percent from 69 new homes sold in July 2013. The average sales price of a new home in July was $268,359, compared to $282,786 a year ago.

Regency Homebuilders topped the sales list, with 20 averaging $232,301. Grant Homes sold 10 homes averaging $249,137. The next highest homebuilder in terms of sales was Hallmark, with five averaging $411,220.

Through July, builders sold 462 homes averaging 3,003 square feet and $268,759. That’s down 10.8 percent from 518 new homes sold through July 2013, averaging 3,148 square feet and $265,096.

Despite the slowdown, Goodwin said he’s still optimistic about the market.

“We’re entering a new era, and everybody has to get adjusted to it and they will,” he said. “People will still want new homes. There’s some sunlight coming through; it’s just going to take a little while for it to shine.”

Chandler Reports is a division of The Daily News Publishing Co. Inc.

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