By the numbers
* 1,690: Number of new homes started in the area in the first nine months of 2016* 1,337: Number of new homes started in the area in the first nine months of 2015* 26: Percent gain in home starts in 2016 compared with last year* 4,484: Record number of annual homes starts in the area recorded in the peak year of 2005Source: The Market Edge data for single-family home permits issued in Hamilton, Bradley, Catoosa, Walker and Whitfield counties.
Home builders in the Chattanooga area are starting the most new single-family homes this year that they have in a decade as low interest rates and an improving economy combine to spur more residential building.
Among the 18 Mid-South markets analyzed by the building analysis company The Market Edge in Knoxville, Chattanooga boasted the biggest yearly gains in home starts with a 26 percent jump during the first nine months of 2016 compared with the same period a year ago.
In the five-county Chattanooga region studied by Market Edge, 1,690 homes were started in the first three quarters of 2016, or 353 more than in the same period a year ago. Home starts are expected this year to reach the highest level in Chattanooga since 2007 before the Great Recession cut into home starts and sales.
"What's driving all of this is employment growth, which is doing even better than we thought in the Chattanooga area," said Dale Akins, president of Market Edge, which tracks building activity in North and South Carolina, Kentucky, southern Indiana and East Tennessee. "These gains are even more than we had projected and shows how strong the economy is doing in the Chattanooga area."
In the past year, Cleveland, Tenn., has led the state in job growth, adding 4,031 jobs in the past year and growing employment by nearly 7.7 percent, according to the U.S. Bureau of Labor Statistics.
In metropolitan Chattanooga, employment grew by 8,518 jobs, or 3.6 percent, in the 12 months ending in September, government figures show.
"Across the board, we're seeing very good growth and it's definitely a good time to be a home builder right now in Chattanooga," said Gus Issa, a lifelong homebuilder in Chattanooga who is founded G.T. Issa Construction LLC in 2003. "More people seem to be moving to Chattanooga to either work or retire and there are more people today working in better jobs or with good, two-income families that can afford to buy more expensive homes."
Issa targets most of his home building for houses priced $350,000 and up and said he sees "very strong" demand for such homes in the Chattanooga area.
Akins and other analysts expect mortgage rates will likely move up somewhat as the Federal Reserve Bank tightens its monetary policy and pushes up short term rates, perhaps as soon as mid December.
But long-term borrowing costs are not expected to rise much as long as inflation remains relatively tame. Akins forecasts continued growth in Chattanooga's home starts in 2017 as the local job market is projected to continue to improve as Volkswagen and its suppliers add more workers for a sports utility vehicle, other local businesses expand to cope with a rising economy and more retirees relocate to the mountains of Tennessee for milder temperatures and lower taxes.
"There's going to be a recession at some point, but we don't see one at this point next year," Akins said.
Contact Dave Flessner at dflessner@timesfreepress.com or dflessner@timesfreepress.com.