There are still some contrarians who think the housing market will crash this year. That’s unlikely.
The experts look for an 8 percent price increase this year. That’s down from the 11.1 percent local growth last year, but it would still be the second-highest annual increase in a decade.
The sales outlook for this year is for a 9 percent increase. That’s about what we saw in the local market last year. Given the lack of inventory and slipping affordability, the local growth rate will likely be a little lower this year.
And what about those mortgage rates?
They have been slowly tracking upward for the past several weeks and are now above 3 percent for the first time since mid-July last year. The outlook is they will average 3.5 percent at year’s end. That means some buyers will be left behind. At the same time, others will rush to lock in the best rate they can. And remember that at 3.5 percent, mortgage rates will be about half of the historical average.
Although the new home industry is seeing record high demand, it’s being hammered by materials price increases, supply chain issues, and a labor shortage. About 70 percent of U.S. builders have begun capping sales so that they don’t run out of inventory. That means new homes won’t take much squeeze out of the inventory shortage.
With that said, here’s what we are now experiencing.
Spring is here, but nothing about it is like it used to be.
Seller traffic is low. The traditional walkup when new listings were beginning to swell the inventory is as dead as disco this year. This year, new listings are flat, and the active inventory is about half of what it was last year.
But that’s not the case for buyer traffic. Our region is in the Southeast U.S. pocket where buyer traffic is super high. That pocket includes Tennessee, South Carolina, North Carolina, Virginia, and West Virginia.
Homes are selling faster than ever. The median time on the market is 19 days less than it was last year. Homes are also selling at a higher price. And those higher prices are beginning to squeeze affordability. Still, there’s a significant generational cohort primed to enter this market this year.
Millennials now account for about 30 percent of the local population. The oldest Millennials are pushing 40, and the mid-ranks are beginning to form households. Here’s the potential that Ali Wolf, Zonda chief economist, outlined in a housing market update last week. She said a Millennial couple who kept their jobs and managed to save their stimulus checks have what is basically a 3 percent down payment. Millennials are the primary first-time buyers and first-timers account for about 32 percent of sales.
Stiff tailwinds and headwinds are blowing, and accurately predicting the housing market is no simple matter. That’s why both buyers and sellers need to have a pro in their corner. The best example of that pro is a REALTOR® who has the training, local market street smarts, and professional network to find opportunities and pilot their clients through any real estate storms that erupt.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee – Southwest Virginia region representing over 1,400 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee.