VOL. 129 | NO. 122 | Tuesday, June 24, 2014
Building Permits Tumble 38 Percent in May
By Amos Maki
Homebuilding activity slowed in May compared to a year ago, with builders filing fewer permits and selling fewer new homes than the same month last year.
Building activity in Shelby County slowed in May, with the number of permits filed falling 38.4 percent compared to the same month a year ago.
(Daily News File/Lance Murphey)
Builders pulled 72 permits in Shelby County in May, down 38.4 percent from 117 permits in May 2013, according to real estate information company Chandler Reports, www.chandlerreports.com. The 72 permits filed by builders in May were up slightly from 68 permits filed in April.
The May permits averaged 3,000 square feet and $244,768, compared with 3,011 square feet and $245,088 in May 2013.
Through May, builders have pulled 329 permits, down 29 percent from 464 over the same period in 2013.
A dearth of developed lots is acting as a weight on the industry, slowing the construction of new homes, said Kim Grant Brown, president of the West Tennessee Home Builders Association.
“We’ve pretty much run through the bank-owned lots now and it’s so expensive to put lots in, developers haven’t jumped on the home train again,” Brown said. “The market is still good; we just have a shortage of lots. There’s just not as much stuff for people to buy out there right now.”
Brown said high municipal fees, combined with the cost of installing utilities, have made it difficult for developers to turn a profit.
“We’ve had developers calling us wanting to sell raw land because they can’t figure out a way to make any money on it,” Brown said.
Because of the time it takes to receive municipal approvals, develop a lot and then build a home, Brown said there is real concern that the lot shortage could have far-reaching consequences.
“Once developers can get back in the game it’s not an overnight process,” Brown said. “It can take a year to get a subdivision approved and then you actually have to put the home in.”
Homebuilders have been warning of the lot shortage over the last year, saying local governments, lenders, homebuilders and developers should come together to address the situation. Brown said municipalities could streamline the approval process and reduce various fees to help spur lot development.
“Anything to kick-start development again would help,” Brown said.
Regency Homes was the most active builder in May as tracked by permits, with 19 permits averaging 2,752 square feet and $207,642. Grant Homes pulled the second-highest number in May, with nine permits averaging 2,804 square feet and $206,796. Kevin Hyneman pulled seven permits, averaging 1,980 square feet and $105,750.
Arlington’s 38002 ZIP code led the way in permits, with 21 averaging 2,832 square feet and $206,144. The 38017 ZIP code in Collierville recorded 12 permits averaging 3,634 square feet and $327,417, and the 38125 ZIP code in Southeast Shelby County recorded 12 permits averaging 2,996 square feet and $253,159.
The St. Andrews Place subdivision in Cordova North’s 38016 ZIP code was tops among subdivisions with six permits averaging 1,907 square feet and $105,750.
Builders sold 51 new homes in May, down 30 percent from 73 in May 2013. But the average sales price of a new home in May was $275,901, up 8 percent from $254,878.
Regency Homebuilders LLC led the way in sales, with 14 averaging 2,915 square feet and $246,704. Kevin Hyneman sold nine homes, averaging 1,886 square feet and $155,839.
Collierville’s 38017 ZIP code recorded the most sales in May, with 12 averaging $409,749. Arlington’s 38002 ZIP code recorded nine sales averaging $258,022, and the Southeast Shelby County ZIP code of 38125 recorded eight sales averaging $199,683.
Builders have sold 284 new homes through May, down 20.8 percent from 359 new homes sold over the same period last year. The average sales price for a new home through May was $274,287, up 5.3 percent from $260,409 last year.
In addition to the lot shortage, Brown said builders have been playing catch-up after experiencing colder than average weather in March.
“That definitely pushed our year back,” she said. “This year we had a bit of a delayed start.”
Chandler Reports is a division of The Daily News Publishing Co. Inc.