Building a new foundation

Building a new foundation

April 27th, 2010 in News

After four years of declining home starts in the Chattanooga area, local home builders expect to build more single-family houses this year than last.

Spurred by historically low interest rates, homebuyer tax credits and an improving economy, the number of homes started has grown steadily since the low point reached a year ago, according to building permit data gathered for area counties.

"The housing market in places like Chattanooga is better than most people think it is," said Dale Akins, president of Market Edge Inc., a Knoxville-based research firm that tracks home building activity across the South.

"It looks like we hit bottom in the first quarter of 2009 and home starts have shown steady improvement since," he said. "But I think the market has still been fundamentally changed for the next 30 years by what we've experienced from this housing slump."

In the Chattanooga region, Market Edge reports that first-quarter home starts were up by 29.5 percent in Hamilton County and were 10.3 percent ahead in Bradley County from the year-ago levels.

But the results were more mixed in North Georgia, with home starts up in Whitfield County, but down so far this year in Catoosa and Walker counties.

Over the past four years, as home starts plunged by nearly 70 percent in the Chattanooga region, membership in the Home Builders Association of Southern Tennessee dropped by more than 20 percent and the number of builders in the Home Builders Association of Georgia fell by 63 percent.

Kelly Lass, executive vice president of the Home Builders Association of Georgia, said Georgia has been hit harder than most Southern states by the slowdown in home building.

"It's been catastrophic," Ms. Lass said. "But we're seeing some improvement, at least in the number of people 'kicking the tires' and looking at new home construction again."

Mr. Akins said that Chattanooga, without the national home builders prevalent in larger markets such as Atlanta, Miami and Las Vegas, was not as overbuilt during the housing boom five years ago and isn't suffering as much from an oversupply of unsold homes.

Tim McClure, president of McClure Construction and former chairman of the Home Builders Association of Southern Tennessee, said he started two new speculative homes this spring -- the first time in more than a year that's he's started such new homes without them being already sold.

Mr. McClure said the credit freeze that put many new developments into a deep freeze has thawed somewhat.

"Is it easy? No," Mr. McClure said. "But it has gotten better than it was."

Tax breaks spur market

First-time homebuyers have been enticed into the market with tax credits worth up to $8,000 under the stimulus package adopted last year by Congress. Other homebuyers also can qualify for up to a $6,500 tax credit.

To qualify for the temporary incentives, however, homebuyers must have a signed purchase contract by Friday and close any home purchase by June 30.

Mr. Akins said the tax breaks have encouraged some sales, but the biggest barrier to selling more new homes still is the relatively high jobless rate and concerns over the future of the economy.

"What really drives the housing market is jobs," he said. "These incentives and housing credits matter, but it's not enough to sustain the market over time."

Hamilton County's biggest builder of homes -- Jay Bell of Bell Construction Co. -- said the tax credits have helped the market, but he expects the improvement in recent months to continue even after the credits expire.

"For our company and me personally, this is shaping up as the best year we've ever had in terms of sales," Mr. Bell said. "A lot of that is probably attributable to the fact that there are fewer home builders left in Chattanooga.

"But the market is definitely coming back all across the board and, if interest rates move up, I think that will encourage even more people to get into the market to stay ahead of rising rates."

Mr. Bell said even the townhouse market, which was hardest hit during the recession, is showing signs of coming back.

"People are now able to sell their existing house, so they can afford to buy a new house," Mr. Bell said.

Tax credit deadline nears

* First-time home buyers wanting to take advantage of the $8,000 tax credit for buying a home must have a binding sales contract signed by Friday to qualify for the federal tax break. The sale must be closed and completed by June 30 to qualify for the tax credit.

* A similar $6,500 tax credit is available to home buyers who are not first-time buyers but purchase a home by Friday, provided the sale is close by June 30.

* More information available about the tax credits on the web at www.federalhousingtaxcredit.com

Continue reading by following these links to related stories:

Area home sales up 42%

Building data show increase in permits

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