Local home starts dip despite growing economy, jobs [photos]

Local home starts dip despite growing economy, jobs [photos]

Rising land, labor and material costs limit housing construction in Chattanooga

February 24th, 2018 by Dave Flessner in Business Around the Region

Roofing work continues on a home in the Providence Point subdivision on Thursday, Feb. 22, 2018 in Ooltewah, Tenn.

Photo by C.B. Schmelter

Gallery: Pent up demandLocal home starts dip despite growing economy, jobsRising land, labor and material costs limit housing construction in Chattanooga

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Biggest builders in 2017

1. Pratt & Associates, 171 home starts with total value of $30.3 million

2. Bell Homebuilders, 68 home starts with total valued at $11.7 million

3. Green Tech Homes, 60 home starts with total value at $10.2 million

4. Ethan Collier Construction, 36 home starts with total value at $7 million

5. G.T. Issa Construction, 27 home starts with total value of $5.1 million

Source: The Market Edge

Biggest subdivision adds in 2017

1. Amberbrook Gardens in Hixson, 38 homes

2. Providence Point in Ooltewah, 32 homes

3. Hampton Meadows Creekside in Oolteway, 28 homes

4. Rivendall Townhomes in East Brainerd, 23 homes

5. Boulder Pass at the Canyons Hixson, 22 homes

Source: The Market Edge

Home starts

In the Chattanooga region, the number of single-family home starts doubled from the depths reached after the Great Recesion in 2011 to 2016. But home starts were essentially flat last year

2010 - 1,186

2011 - 1,142

2012 - 1,461

2013 - 1,486

2014 - 1,505

2015 - 1,785

2016 - 2,247

2017 - 2,243

2018* - 3,000

* Projection for 2018

Source: The Market Edge home starts in Hamilton and Bradley counties in Tennessee, and Catoosa, Walker and Whitfield counties in Georgia

Despite the addition of 10,635 jobs in the Chattanooga region last year, home starts unexpectedly dipped during 2017 in the five major counties in and around Chattanooga as rising land, labor and material costs held back the growth in new housing construction.

Higher demand and home prices were expected to create a double-digit boost in the construction of new houses in the area. But in 2017, the number of single-family homes built in the Chattanooga region totaled 2,243, or four fewer than in the previous year.

"Home starts were flat in this area, even though we had expected that gains in employment and population would have increased the number of houses being built," said Dale Akins, founder and president of The Market Edge, the Knoxville-based company that has tracked building activity across the Mid-South for the past 25 years. "If builders are able to find the right lots and get enough workers, we should see a significant increase in home starts this year."

Home starts in the region more than doubled from the low-point reached in 2011 in the wake of the Great Recession until the recent peak in 2016.

Akins expects the number of new houses started this year in the five major counties in the Chattanooga region — Hamilton and Bradley counties in Tennessee and Catoosa, Walker and Whitfield counties in Georgia — could rise by more than a third to 3,000 home starts, assuming builders can find the land and workers to meet the growing demand.

"The jobs gains in this market last year were monster numbers that many other markets would love to have," Akins told the Home Builders Association of Greater Chattanooga. "The demand is obviously there, but the production was not, at least last year."

Builders said finding available building sites in the mountainous terrain of the Chattanooga area can be difficult, and rising costs for land, material and construction crafts are pricing more would-be home buyers out of the market.

"There is demand for more new homes to be built, but much of that demand is for a less expensive house that we can provide right now," said Jay Bell, president of Bell Homebuilders and the 2018 president of the Home Builders Association of Greater Chattanooga. "A lot of that has to deal with overregulation and the extra costs for building a new subdivision today."

Chattanooga's stormwater runoff rules, which were previously stricter than the state mandate but relaxed by the city council in November, discouraged or delayed building starts in the South Chickamauga Creek watershed, Bell said. Other home builders said higher land, road and utility service expenses have made lots pricier while increased costs for building materials have pushed up the costs of building a new home.

"Our costs have tended to rise more than incomes, for many families," said Win Pratt, president of Pratt Homes, the largest home builder in the Chattanooga area. "It used to be we could develop and build homes in the $200,000 range, but that is no longer possible for most homes."

Last year, the median home price sold through the Greater Chattanooga Realtors' multiple listing service was priced at $175,000. Although prices rose a strong 8.7 percent last year in Chattanooga, local home prices in 2017 were still nearly 30 percent below the U.S. median price. Such prices remain, on average, below what most home builders say they are able to construct a typical single-family house for in one of the region's new subdivisions.

Akins said Chattanooga home starts could top the record high levels reached in 2005 if builders could find enough home lots and building talent.

The five-county Chattanooga region shed 22,836 jobs during the 2008-2009 Great Recession and didn't recapture all of those lost jobs until 2016. But area employment now is growing steadily and is outpacing the nation as a whole.

"Our builders are busy and doing well, but it is a challenge to find enough land and workers and regulations continue to add to the cost of building new homes," said Terry Greene, executive director for the Home Builders Association of Greater Chattanooga. "That's why we continue to push for reasonable regulations and land use policies to make sure that our builders can keep the American dream of home ownership affordable in the local market."

Contact Dave Flessner at dflessner@timesfreepress.com.