VOL. 129 | NO. 253 | Tuesday, December 30, 2014
Shelby County Homebuilding Activity Continues to Slow
By Amos Maki
Homebuilding in Shelby County was off last year’s pace again in November, with builders pulling fewer permits and selling fewer homes than in November 2013.
New housing activity in Shelby County was down in November compared to the same month last year, with builders pulling fewer permits and selling fewer new homes.
(Daily News File/Andrew J. Breig)
Shelby County homebuilders filed 43 permits last month, down 29.5 percent from 61 permits in November 2013, according to real estate information company Chandler Reports, www.chandlerreports.com. The 43 permits filed in November is down 31.7 percent from the 63 permits filed in October.
“I tell you it is the same old story and it’s getting to be a crisis,” said David Goodwin Jr., owner of David Goodwin Jr. Cos. LLC and 2015 president of the West Tennessee Home Builders Association.
The permits in November averaged 3,261 square feet and $248,403, compared to 3,128 square feet and $251,858 a year ago.
The top homebuilder in November, as measured by the number of permits, was Regency Homebuilders LLC, which pulled 10 permits averaging 3,064 square feet and $227,702. John Worley pulled four permits averaging 4,262 square feet and $375,000. Barry Duke pulled three permits averaging 3,551 square feet and $181,616.
The top ZIP code for permits in November was Arlington’s 38002, with 21 permits averaging 2,956 square feet and $199,697. Collierville’s 38017 ZIP came in second, with 10 permits averaging 4,164 square feet and $386,700. All other Shelby County ZIP codes recorded four or fewer permits.
The subdivision notching the most permits was The Stables in Collierville, with seven permits averaging 4,262 square feet and $376,429. No other Shelby County subdivision recorded more than three permits.
Year to date through November, builders filed 777 permits averaging 3,141 square feet and $254,129. The 777 permits through the first 11 months of 2014 is down 10.8 percent from 872 over the same period last year.
Homebuilders filed 887 permits in 2013, down 3.3 percent from 918 permits filed in 2012, but above the 698 permits filed in 2011.
Goodwin said a severe shortage of developed lots is constricting new home activity.
“You can’t build on what’s not out there,” he said. “It’s as simple as that. It’s truly a crisis in the homebuilding industry we’re facing right now.”
Builders have been struggling with a lack of developed lots all year, a trend that looks to continue as the cost to develop lots rises and lenders remain skeptical of lot development.
In the aftermath of the recession, lenders snatched up a large amount of land and lots, offering cut-rate prices to developers over the last several years. But after running through that supply, lot prices are on the rise.
At the same time, stricter lending standards enacted after the housing crash and recession along with the economics of lot development can make it an uphill battle for developers to finance lots. This year, several builders even began developing their own lots.
“It’s a phenomenon that’s been occurring all year, and it looks like it’s going to continue until something breaks free,” said Goodwin.
In addition, factors like homebuyers purchasing existing homes instead of new homes are playing a role in the decline of new housing activity in 2014, said Charles Morgan of Vintage Homes.
“Many of the people that would have purchased a new home are purchasing used homes that are fixer-uppers or bank foreclosures,” said Morgan.
“They are doing so because those homes are more affordable than brand-new homes. The truth is when you add up all the costs to bring a fixer-upper or a foreclosure into a decent livable condition – don't forget all the maintenance and repairs that are unexpected that you will acquire with the used home – for the same square footage you will find that the brand-new home is a great bargain.”
Morgan also said its unclear how deep the new home market is because some builders are now building new homes for rent.
“The permit totals are skewed by new home rental properties that make up a larger portion of permits than ever before,” said Morgan.
“Reports show that used home foreclosures have slowed due to lack of availability, but the super funds from foreign investors are eager to purchase new homes in Memphis for rentals to fill the rental gap,” Morgan said. “One of the changing realities of our post-real estate crash is rental homes being available where new homes are sold.”
Homebuilders sold 58 new homes in November, averaging 3,032 square feet and $299,118. The 58 new homes sold last month is down 27.5 percent from the 80 homes sold in November 2013, while the average sales price is up 19 percent from $251,914.
Regency Homebuilders led the way in sales, with 12 averaging 2,707 square feet and $228,743. Karen Garner of Magnolia Homes recorded five sales averaging 4,109 square feet and $526,125. Grant Homes and Hallmark each recorded three sales.
Through November, builders have sold 763 new homes in Shelby County, down 11.3 percent from 861 new homes sold over the same period in 2013. The homes sold in November averaged 2,964 square feet and $270,314, compared to 3,121 square feet and $263,723 over the same 11-month period in 2013.
Goodwin believes the new-home market remains stable but worries demand could soon outpace supply if more lots are not developed.
“There will be opportunities if we have the product,” said Goodwin. “That’s a big ‘if.’”
Chandler Reports is a division of The Daily News Publishing Co. Inc.