VOL. 129 | NO. 190 | Tuesday, September 30, 2014
Real Estate Experts Look at Impact of North Mississippi
By Bill Dries
Six years after the real estate bubble burst nationally, the recovery of the commercial and residential sectors in Memphis is slower than in other parts of the country. But they are recovering on their own new terms, say the incoming president of the Memphis Area Association of Realtors, the president of the West Tennessee Home Builders Association and a mortgage lender.
“I would say that Memphis is recovering slowly and gradually which is not bad,” said Joe Steffner, president-elect of MAAR, on the WKNO-TV program “Behind the Headlines.” “We’ve got a long way to go.”
The program, hosted by Eric Barnes, publisher of The Daily News, can be seen on The Daily News Video page, video.memphisdailynews.com.
All three point to competition across the borders of Shelby County, particularly the state line with Mississippi.
For Kim Grant Brown, president of the homebuilders association, the cost of building a home in Shelby County is more expensive from the outset than it is in North Mississippi.
“If I’m building in Collierville, I can build the same house in Collierville that I’m going to build in Mississippi, and it’s going to be $10,000 more,” she said. “They (North Mississippi) group their inspections together. You are getting the same inspections. It’s just that it’s a simpler process. … Because of the cost of utilities in Shelby County and because of the fees that the municipalities charge, just right off the bat, without moving an inch of ground, it’s $10,000 more per lot.”
Steffner points to industrial development in North Mississippi, with Olive Branch being the center of that activity.
“All of which is going to get much stronger as (interstates) 269 and 385 combine next year,” he said. “There’s going to be a ton of land down there, a lot of land that’s available for development. Not only will there be industrial development down there as our industrial base continues to move to Mississippi, but they are talking about pursuing office tenants. And there will be a lot of single family down there.”
The Mississippi boom is a phenomenon of the last decade that has become more pronounced as the nation moves out of the recession, with Memphis moving at a noticeably slower pace than other areas in the region.
“If you look at the percentages, 70 percent of the industrial deals that are done in the city are done in Mississippi,” Steffner said. “That’s a huge change from 10 years ago when they were all done in Memphis. No one wanted to go to Mississippi.”
The sea change is incentives, with Steffner saying Memphis leaders should continue to use incentives that abate property taxes, such as payments-in-lieu-of-taxes, a lively political issue in Memphis at the moment.
“The half-empty people, they want the pensions for the retirees. They want the benefits and they want the PILOTs to stop,” he said. “You have the other people that have the bigger picture. If we’ll hang on, and realize that the rest of the country is booming in cities our size and it’s all going to come to Memphis and we’ll continue to play the game with PILOTs and be more aggressive … then we are going to grow this economy and grow out of it.”
David Umsted, vice president of lending for Triumph Mortgage, said part of the legacy of the 2008 collapse is more regulations on the lending side.
“Some of them are good. Some of them are a little bit overboard,” he said. “We may not go back to the good old days … but we may be entering a new normal where it’s more seasonal.”
In that new normal, the first and fourth quarters are slow, with the second and third quarters reacting to trends.
The new regulations and scrutiny when it comes to lending are a contrast to what Grant Brown saw before the bubble burst.
“I knew we were in trouble in 2007 when one of my homeowners was talking about how they couldn’t believe they could buy a house because they just foreclosed on one nine months ago,” she said.
Of concern to Umsted is the impact of hedge funds and other out-of-town and out-of-state investors buying up so much residential and multifamily property in Memphis.
A sudden sale of those properties could flood a market that now has a tight supply of housing.
“It’s certainly very scary. It speaks to the affordability of Memphis,” he said. “If we could get our own citizens buying these houses, living in them or renting them out – it’s always better than having a group come in and buy a couple of hundred homes. They may decide to get rid of them all one day. It’s something to watch.”