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VOL. 130 | NO. 18 | Wednesday, January 28, 2015

Lot Shortage Leads to Fewer New Homes

By Amos Maki

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Shelby County homebuilding activity slowed in 2014 as builders filed fewer permits and sold fewer homes than in 2013.

Homebuilding activity in Shelby County slowed down in 2014 as new home permits and sales lagged behind 2013’s pace.

(Daily News File/Andrew J. Breig)

Homebuilders filed 850 permits in 2014, down 8.6 percent from 930 permits filed in 2013 and down 7 percent from 914 permits filed in 2012, according to real estate information company Chandler Reports, www.chandlerreports.com.

Builders sold 838 homes in 2014, down 6 percent from 893 homes sold in 2013. The homes sold in 2014 averaged 2,969 square feet and $270,502, compared to 3,110 square feet and $262,918 in 2013.

Throughout 2014 builders sounded warnings that a shortage of developed lots would slow the industry down and that the lot shortage was the driving factor behind the reduced permit and sales numbers.

“The lot situation in Shelby County is getting critically low,” said David Goodwin Jr., owner of David Goodwin Jr. Cos. LLC and president of the West Tennessee Home Builders Association. “We know what the problem is. There is very little coming online as far as new developed lots are concerned.”

Some builders, including Grant Homes, even waded into the development world, developing lots and other subdivision infrastructure that developers normally handle.

“Quite frankly we’d rather be a homebuilder but right now we’re a developer, too, because we need lots to be able to build on,” said Kim Grant-Brown of Grant Homes.

Builders said they were able to sell the homes they did have even as prices crept up, pointing to healthy demand for new homes, Grant-Brown said.

“We were able to steadily raise prices and the houses were all able to sell,” Grant-Brown said. “That’s a good sign of a healthy selling market but the new home inventory is still at historically-low levels. Everything we’re putting on the ground we’re selling. Inventory is just super-low right now.”

Permits in 2014 averaged 3,135 square feet and $252,967, compared to 3,193 square feet and $250,733 in 2013 and 3,208 square feet and $246,270 in 2012.

The top ZIP code, as tracked by the number of permits, was Arlington’s 38002, which recorded 178 permits averaging 3,296 square feet and $236,409. Collierville’s 38017 recorded 150 permits averaging 3,771 square feet and $351,047. Cordova North’s 38016 ZIP code recorded 128 permits averaging 2,412 square feet and $172,549.

The top subdivision in 2014, as tracked by permits, was Fountain Brook in Cordova North, which recorded 51 permits averaging 2,562 square feet and $178,710. The Wolf River Ranch subdivision in Collierville recorded 33 permits averaging 3,997 square feet and $396,667. The Windsor Park subdivision tallied 29 permits averaging 2,995 square feet and $244,129.

The top builder, as tracked by the number of permits, was Regency Homebuilders LLC. Regency filed 213 permits averaging 2,868 square feet and $213,655. Grant Homes filed 71 permits averaging 3,058 square feet and $220,628. Kevin Hyneman pulled 68 permits averaging 1,953 square feet and $140,711.

As tracked by new home sales, the top ZIP code in 2014 was Arlington’s 38002, which recorded 172 sales averaging 3,211 square feet and $267,621. Collierville’s 38017 ZIP code recorded 158 new home sales averaging 3,364 square feet and $393,168. Cordova North’s 38016 ZIP code tallied 135 new home sales averaging 2,313 square feet and $179,597.

The Fountain Brook subdivision had the most new home sales in 2014, recording 50 averaging 2,515 square feet and $187,180. Schilling Farms recorded 36 new home sales averaging 2,267 square feet and $278,145. Walker farms netted 33 new home sales averaging 2,658 square feet and $235,232.

Regency Homebuilders topped Shelby County in sales, with 202 averaging 2,815 square feet and $243,769. Grant Homes sold 72 new homes averaging 2,921 square feet and $247,425. Kevin Hyneman had 55 sales averaging 2,068 square feet and $158,614.

Goodwin Jr. said new home prices should continue to rise as inventory remains low, particularly in Shelby County.

“What builders are putting up is being absorbed pretty quickly,” Goodwin said. “With a limited amount of new home inventory that’s going to put pressure on the price of homes.

“Memphis has always been at the top of the list nationally as far as affordability but that’s going to have to change with such a limited inventory,” Goodwin said. “It’s hard to believe the inventory is so small.”

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

PROPERTY SALES 83 405 4,276
MORTGAGES 104 424 4,814
BUILDING PERMITS 148 883 10,151
BANKRUPTCIES 53 264 3,149