Will FedEx and IP Expansions Bail Out Suburban Homebuilders?

Message from Shelby County suburban developers and homebuilders to corporate giants FedEx and International Paper: Hurry up with those expansions. Both Fortune 500 companies have announced plans to add 1,000 or more employees in Memphis, a majority of them in well-paid positions. FedEx said this week its proposed delivery agreement with the United States Postal Service would mean hiring 500 more pilots and hundreds of mechanics. International Paper last month announced a Memphis expansion that will result in more than 1,000 jobs. The new jobs can’t come soon enough for suburban developers like Jackie Welch of Welch Realty. “We’re definitely in a recession,” he said this week. “Every homebuilder from the top of the line to the bottom is feeling it.” Welch said Neshoba Bank, which he serves as a director, foreclosed on two new homes this week when the builder couldn’t make payments. He blames the problem partly on the falling stock market but mainly on developers putting too many lots on the market and homebuilders building too many homes. In Collierville, Welch said $350,000 homes are going for about $250,000. He said Cordova, where Welch Realty was one of the primary developers, is also overbuilt. Welch’s Devonshire Gardens, a high-end residential development on Poplar in Germantown, has made only about ten sales so far in the 128-lot development. Don Berge, president of Market Graphics of Memphis, a housing-market research firm, said the Memphis-area housing market is overbuilt but beginning to correct itself. “Our numbers through last November show a 25-percent drop in housing starts so for a developer I’m sure it feels like a full-blow recession,” Berge said. “The good news is that for the first time we closed about 600 more houses than we started, so the oversupply just has to be worked out.” The recession in the housing market makes it that much more important that a third recent corporate announcement, the sale of Morgan Keegan to Birmingham, Alabama-based Regions Bank, not result in a loss of jobs. The sale of Morgan Keegan’s competitor, Nashville-based J.C. Bradford Company, to Paine Webber last year wound up decimating Bradford and costing Nashville some 1,300 jobs. Morgan Keegan co-founder and CEO Allen Morgan Jr., said this week he is confident that won’t be the case with his company. “These guys want us to run the whole show,” Morgan said. “Nothing changes for us. They hand over their securities business to us, and they use our name. The addition of their 130 brokers gives us over 1,000 brokers.” The $800-million deal closes in March. Morgan said he is taking all his payment in stock and will be the largest shareholder when the deal is complete. “I’m not going anywhere,” he said. A lot of people in the building business are hoping his employees aren’t either.

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