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Raising roofs: Home construction permit activity stays strong in first quarter

Building permits issued during the first quarter for single-family home construction in the Charlotte market rose by 11 percent over the same period last year, according to figures recently released by the U.S. Census Bureau.

CP front.webThat, according to a Charlotte housing analyst and a prominent homebuilder, signals a continuing recovery in the new home market, building on significant gains seen since late 2011.

The rate of the recovery in Mecklenburg and eight surrounding counties has moderated since climbing by nearly 40 in the first quarter of 2013 compared with the same quarter in 2012.

“The market last year was hot, and what we’re seeing now is continuing growth but a lot cooler,” said Bernard Helm, whose Rocky Mount-based Market Opportunity Research Enterprises analyzes the Charlotte market.

“Last year’s growth was not sustainable into this year,” Helm said.

“We need a slower 2014 to allow the chain of supplies needed to build houses – land, nails, lumber, labor; all the things you need – a chance to catch up. High demand creates a distortion in the supply chain; if the demand is not so overpowering, the supply chain will recover. That will lead to more consistent growth in 2015 and ’16.”

Bill Saint, owner of Classica Homes and president of the Home Builders Association of Charlotte, agreed that “good, steady growth is the watchword for Charlotte – it’s not the up-and-down roller-coaster ride we’ve seen in some of the West Coast markets.”

But, Saint added, 2014’s first-quarter building permit figures might have been tamped down by cold and snowy weather in January and February and rain in March.

“It was a nasty quarter for getting houses out of the ground, and that has a definite effect on permits,” Saint said.

Pushing beyond limits

Builders are continuing to push beyond the Charlotte city limits, according to a geographic breakdown of 2,603 single-family residential building permits issued in the nine counties during the first quarter of this year.

Mecklenburg County still accounts for more permits than any other with 980. But in terms of growth, Meck was up only 1.1 percent over the first quarter of 2013 while the other eight counties together were up almost 19 percent.

That, said Helm, is largely explained by builders and developers – and particularly the big, national, market-leading builders like D.R. Horton, M/I Homes and PulteGroup – pushing farther out in search of developed lots or developable land at a price that will make building more profitable.

“That kind of land is not as available in Mecklenburg,” Helm said. “The challenge is to buy land at a good price because that’s where a lot of the profit is – in the land. The fact that more land is available (beyond Mecklenburg) is helping to keep the price of lots reasonable.”

Union and Cabarrus counties on the N.C. side and York County, S.C., remained the busiest homebuilding counties in the market outside Meck in the first quarter of 2014, each accounting for more than 300 single-family permits in the quarter.

Lancaster growth explodes

But in terms of growth, it’s all about Lancaster County, S.C., “where you’ve got all the nationals crowding in there” to capitalize on the lower property, gasoline and grocery taxes afforded in the unincorporated area of the county’s upper panhandle called Indian Land, Helm said.

Single-family building permits issued in Lancaster rose 755 percent in the first quarter, to 248, up from 29 in the same period last year.

That’s the highest number of single-family permits issued in any first quarter in Lancaster since 1996, when the Census Bureau records stop. Even during the 2004-2006 run-up to the housing bust, Lancaster County never issued more than 100 permits during a first quarter.

Lancaster’s recent explosion in single-family building took off in the third quarter of 2013, said Steve Yeargin, interim building official for the county. Single-family permits jumped 522 percent over the previous quarter, to 249 that quarter. They remained high in fourth quarter at 302.

“Ninety percent of that is in Indian Land,” Yeargin said. “It is a very desirable area.”

That desirability has been an established fact, Helm said, since PulteGroup’s older-adult Del Webb division opened the 3,400-lot Sun City Carolina Lakes in 2007.

The vast majority of the single-family homebuilding permits is department has been issuing, Yeargin said, are for homes to be built in existing single-family subdivisions, most of which were approved before the recession.

In addition to Sun City, they include Walnut Creek, Reid Pointe, Almond Glen, Audubon Lake and Wakefield. All are in Indian Land.

Yeargin said he thinks more permits are on the way for the upper Lancaster peninsula, because developers have proposed five new subdivisions there that are being considered for approval by the county.

And Penelope Karagounis, Lancaster County planning director, said she expects that more will follow in the coming months.

The highest-growth areas outside the Charlotte city limits are to the north, east, south and southwest, including north Mecklenburg, southern Iredell, southwestern Cabarrus and eastern Union counties on the N.C. side, and York and Lancaster counties, S.C.

Gaston activity picks up

But to the west, Gaston County, which is just as close and easily accessible to Uptown and other destination areas of Charlotte, has traditionally lagged behind in residential development, and still does.

“Think about the most desirable approach to a house and think about going west from Charlotte,” Helm said. “There is a lot of industrial and commercial, and there’s the airport – it’s a less attractive approach than some of the other areas. Charlotte has (traditionally) gone southeast to compensate.”

Despite that disadvantage, Gaston’s first-quarter 2014 single-family building permits are up 27 percent over the same quarter in 2013, though the number of permits is still low, at 117.

“That’s about what I’ve been seeing here,” said Brian Sciba, administrator of building inspections in Gaston County.

“The tract builders – the big production builders – are starting to come in and buy (existing) lots. It’s all on the Mecklenburg side of the county, Mount Holly, along Mountain Island Lake and the (Catawba) River, down to Belmont and Lake Wylie. I’ve been very encouraged by it.”

The existing subdivisions in Gaston that are seeing new activity range from the pricey Reflection Pointe – “that’s our big high-end subdivision,” Sciba said – to the more affordable Autumn Woods, where Charlotte’s Oakmont Homes is now the builder. Between those extremes, David Weekley Homes of Houston is building in Eagle Park and Stonewater Bay, Sciba said.

Sciba said he expects his department will issue more single-family home permits as two new subdivisions prepare to break ground in Belmont. Seven Oaks, which will be on the upper end of Lake Wyle, will have 810 lots, and Morgan’s Branch will offer 153, Sciba said.

Helm said he expects the Charlotte-area homebuilding recovery will eventually lift Gaston County near the levels of activity in other parts of the market.

“Despite the impediments, it will happen,” Helm said. “Give it time.”

Mecklenburg Times Graphic

Mecklenburg Times Graphic

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