Mark Simpson is putting the finishing touches on a spec home — something he doesn't build very often — in a new development, Dogwood Creek.
"It's 34 lots, plus or minus 2 acres each," he said. The 2,600-square-foot home Simpson is building will be priced around $325,000.
Spec homes aren't as common as they once were, as they tie up money. A house that sits empty and unsold doesn't do anything for a builder's cash flow.
But Simpson, the owner of Legacy Construction and who has built two St. Jude Dream Homes, is ready to build another spec home in the development soon.
"Sometimes you have to sit on a spec home for a little while, but with a custom house, it's pretty much there, ready," he said. "I don't do a lot of spec homes, but I hooked up with David Turner and Chris Patton, who bought this property in 2008."
The investors/developers sat on the property for a few years — one reason being the Great Recession from 2009-10 — but decided to start developing and marketing Dogwood Creek about two years ago.
Simpson began construction of the first spec home in the subdivision in July.
"This market is different from the larger markets, where the bigger construction companies, all they do is put up spec homes," Simpson said. "The issue here in Northeast Mississippi is there just aren't a lot of new subdivisions coming out of the ground."
Indeed, the low inventory of homes on the market has been an issue all year in the area.
Through the first three quarters of this year, 1,483 homes have been sold with a total sales volume of more than $220 million. The median price for a home is right at $125,000. For all of 2018, total home sales were a record 1,955 for $260 million and a median price of $129,000.
The inventory in the area has hovered around 800; traditionally that number has ranged from 1,100 to 1,200.
And the low inventory is a nationwide problem that's also affecting prices.
The National Association of Realtors said Tuesday that U.S. home sales fell 2.2% in September, as rising home prices and lower inventories stifled homebuyers.
Homes sold last month declined at a seasonally adjusted annualized rate of 5.38 million units, ending a two-month streak of sales gains.
As average mortgage rates have fallen nearly a whole percentage point in the past year to 3.61% in September, economists say higher prices and a lack of listings have put a ceiling on the growth seen this past summer.
"The resale housing market is caught in a crosscurrent of conflicting forces," said Shernette McLeod, an economist at TD Economics. "On one hand, lower mortgage rates and a strong labor market have improved buying conditions. On the other, the duo of low inventory and rising home prices have kept a lid on the pace of sales expansion."
Homebuyers have been hamstrung by a shortage of available properties this year, especially at the lower-priced end of the market. Inventory is down 2.7% from a year ago. Land and labor shortages have also constrained building, so a tightening supply of homes has pushed prices up at a pace faster than income. Home prices rose in all four regions in September, while sales of existing homes declined.
"Even today's low mortgage rates and healthy jobs situation can't overcome the lack of inventory of homes below $300,000," said Robert Frick, an economist at Navy Federal Credit Union. "Fortunately, the long-term outlook for housing is better, as housing starts and permits are increasing, meaning there will be more homes on the market in the months ahead."
The median sales price climbed 5.9% from a year ago to $272,100, outpacing wage gains as the strongest price appreciation since January 2018.
Simpson said builders are having a hard time finding lots to build homes in Northeast Mississippi.
"There's not really much at all in the city of Tupelo, and development costs are up," he said.
The Craftsman-style spec house Simpson built in Dogwood Creek has hardwood floors, tile showers, and granite countertops.
"In the spec market, you won't get all the features in a custom-built house, but we're trying to incorporate some of the nicer features you see," he said. Walk-in closets with wooden shelving, shiplap walls and a coffered ceiling are among the highlights.
Turner and Simpson are putting the spec house on the market soon, hoping it will draw interest in Dogwood Creek and allowing them to build more.
"We want to sell them as fast as we can build them," Turner said, a goal Simpson is more than happy to meet.
