Why is the new home permit situation looking anemic? – donfenley.com

Drive around the region and you can see increased levels of new home construction. DR Horton the nations largest homebuilder has moved into the area. Theres also chatter about a second national builder poised to set up shop in Sullivan County. And local builders say theyre busier than theyve been in a long time.

But only a 3% increase in permits?

If you look at just the numbers, the regions new home permits have been flat for three years. The permit level has been slightly over a 1,000 a year since 2017. And its the best performance since 2008. Last years total was about 29% off the 2008 pace. But four years ago, the new home sector was performing at about half of its pre-recession capacity.

And if you step back and look at regional patterns, new home construction has also plateaued in the Chattanooga and Asheville metro areas. Only Knoxville is seeing an increasing growth rate.

Whats going on has several drivers.

Theres also the standard material cost increases and a construction labor shortage headwind.

And then theres the weather.

The weather is killing us, said Kelly Wolfe of Wolfe Development while being interviewed on a rainy afternoon. When you work outside, moving dirt, laying brick youre heavily dependent on good weather to accomplish your sales quotas. And, weve had a couple of the rainiest years in history. You simply cant get enough work done with this weather pattern. There are lots of good things going on. But the weathers not one of them.

Some of the fundamentals for continue new home gains are in place. The secession of lot development that occurred during the Great Recession has ended. While it has returned, it has not gotten ahead of immediate demand, Wolfe said. A similar dynamic exists with spec home construction. Wolfe said he doesnt see any slack at least in the area where he builds where theres more building that what the market will bear.

The distribution of 2019 permits also says a lot about how the region is developing.

Last years biggest new home permit gain came in Carter County were permit pulls were up 18%. Combined with Washington Countys 9% gain, you can see the geographic preference the market is setting. Together the two accounted for a little better than half of the new home permits in the seven counties included in the Market Edges 2019 year-end residential building permit trend report.

Sullivan County had 276 new permits last year a 5% increase. It has been in the 200 plus new permits range for eight years. Its the most stable permit pattern in the region. The 2019 count was the highest in those eight years by one permit. But its not leading the pack and the counties in its sphere of influence didnt see the same stability last year. Hawkins Co. permits declined by 41%, Scott Co. VA was down 30% and Washington Co. VA was down 20%.

Greene County is another example of a slow, steady new home permit pattern. Last years permit total was down by 3%, down four from the previous year. Greene Co. permits have been in the 100 a plus new permits a year for four years.

The permit data begs the question. If the soggy weather pattern is a major headwind, how much new home growth is being bogged down?

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Why is the new home permit situation looking anemic? - donfenley.com