Will Knoxville New Construction Save The Day?

….We Think Yes!

In our recent New Construction Update for Knoxville, TN, we noted that there is potential for an upcoming shift in the real estate market. There are also many questions surrounding this shift, but looking ahead to find answers is what will determine which Knoxville builders and developers will survive in this evolving market.  The challenges ahead stem from low inventory (see graph below), climbing interest rates, affordability and other factors, all of which could hinder buyers from being able to purchase a home.

New Construction Knoxville TN

Fortunately, there is hope on the horizon.  As Inman points out, new construction may just save the day.  Builder confidence is higher than ever, and in February, housing starts as well as new home sales were growing. This is a good sign, and could help alleviate the challenges of low-inventory real estate markets by giving buyers the option to buy a new home versus an existing one.

Some notable facts about new construction from Inman:

  • New builds typically represent about 10 percent of the market, which is a relatively small portion
  • The median price of a new home is higher than that of an existing home
  • New home starts soared during the housing boom, but flattened over the past few years, and have not yet fully recovered.
  • All around the country, questions of who should build, where they should build and what type of housing they should build has been discussed in neighborhood councils and has made it onto a few city ballots during recent elections.
  • Rising costs of land, labor and materials may hurt new construction ventures, especially in lower price points where there is the most demand.
  • The search for affordable housing is already pushing many potential buyers out of major metropolitan areas.

With buying season upon us, The Holli McCray Group is here to help builders and developers overcome the challenges stemming from low inventory and affordability.  Our team has hundreds for home buyers looking for their perfect home, but have not yet found it.  What better way to solve this problem that with the purchase of a brand new home from a trusted Knoxville builder endorsed by the Home Builders Association of Greater Knoxville (HBAGK).  Based on all of the information we have seen recently, this is a fantastic time to be building new homes!

Learn more about our new construction strategic alliance program for builders and developers in the Knoxville area.  Schedule a time to speak with our New Construction Specialist, Darryl Dardar, who has an impressive resume working with both builders and developers to effectively sell their properties. 

 

Links:

New Construction Market Update for Knoxville, TN

where does new construction go from here…

New Constructions, Knoxville, TN

The residential new construction real estate market is great now, right?  Buyers are abundant and many builders can’t build ’em fast enough. Sound familiar?  While the underlying financial circumstances are different than the housing bubble we experienced before 2007, many believe a shift in the real estate market may be just ahead.  What did you learn from the previous housing market shift and what are you doing differently this time?

Today we face some different challenges

Housing inventories continue to diminish, especially for entry-level homes.  Distressed properties are at their lowest levels in years.  Home values continue to increase at an average of 5% or better annually *(1).  However, affordability, as a percentage of income, has remained flat *(2) since 2009 in part due to persistently low mortgage rates *(3) and flat wage growth *(4).  Student debt also plays a role in the purchasing power of millennials (a huge segment of the future home buying market). *(5)

Think about those facts for just a minute.  Do you think mortgage rates are going to stay at these historically low rates?  Will wages suddenly begin growing at the rate needed to keep up with the increasing costs of living?  Are housing prices going to continue increasing due to the short supply in the market, thus making affordability even more of an issue?   How will the ever-tightening appraisal process affect that increase? Will the student debt of your future customers suddenly disappear?  While you can’t predict the future, can you see the possibility of another shift in the market?

How you prepare now will determine how well your business survives

Will you do what you’ve always done because it worked in the past or will you be forward-thinking and plan for the long-term success of your business?  We certainly don’t have all of the answers, but we do have a wealth of ideas and resources.  We offer different ways of looking at the home building industry and ways to better prepare for the future with fewer risks, less volatility, and greater opportunity.  We are looking for a few developers, real estate investors, builders, and banks to create something unique with us as strategic partners.   There are no obligations on your part to see if we should work together.  What we can promise is an open-minded discussion about the future and how to prepare.  Let’s schedule a time to simply have a conversation.

 

  • *1. Home prices for 2016 increased 5% year over year from 2015 but showing signs of regressing back to the long-term average of 4%. – Source NAR
  • *2. Housing affordability has historically averaged around 21.6% of income but has dropped to 15% or below since 2009. – Source NAR
  • *3. Mortgage rates have historically averaged 8.2% since 1972 with rates averaging well below 5% since January 2011 and averaging 3.65% for 2016. – Source Freddie Mac
  • *4. Middle-class wages are stagnant—Middle-wage workers’ hourly wage is up 6% since 1979, low-wage workers’ wages are down 5%, while those with very high wages saw a 41% increase. – Source EPI
  • *5. Student loan debt has increased from 0.3 trillion in 2003 (representing 13.63% of total debt) to 1.3 trillion in 2016 (representing 36.11% of total debt) – Source Federal Reserve Bank of New York
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