About 400 affordable homes needed to balance local market
Jan Stapleton - 2023 NETAR President
There’s no question that the local housing market has an affordability problem. It’s a simmering nation-wide issue that has bubbled to the top of discussions for frustrated potential buyers, chambers of commerce, local government officials and even Congress.
They say the first step to solving a problem is identifying it. But so far, the process has been as much hang wringing and laments that “something must be done” as workable solutions. What’s missing is an actual estimate of the affordable houses needed and where. Thanks to the National Association of Realtors® (NAR) Research Department and Realtor.com® there’s a needs assessment that could help move the discussion forward.
Still, the unanswered question is how to get them built. When asked, local builders say they cannot afford to build affordable homes and make a profit. What has flowed onto the market are flips from local entrepreneurs, but there are not enough of them to fill the gap.
For the most part, the housing market is free market dominated. Despite all the talk about home prices, what’s fair and what’s not, the reality is a house is worth only what a willing buyer and seller agree upon. Everything before and after that is a value or cost added function with some taxes and fees added to pay for government services. And while the free market does an excellent job of identifying and meeting demand, it doesn’t concern itself with fair results.
A first step toward a data-driven solution is the obvious definition of affordable then crunching the numbers of existing inventory for a baseline to expand to how many houses and at what price is needed.
Once there’s a local affordable income range – it’s different for every community – is set, it’s a matter of looking at what’s on the market, at what price and how many affordable homes are needed for balanced market conditions. Five to six months’ inventory is typically used to define balanced market conditions.
The NAR®-Realtor.com® study compares the number of available homes on the market versus what’s needed to balance the market. It’s good work and a solid examination of a complex issue. Unfortunately, it only includes the top 100 US metro markets.
But, with some reversing engineering, it’s possible to stay within the boundaries of the NAR®-Realtor. Com® study for a closer look at the NE TN and SW VA market. The localization estimate is that the region needs about 426 affordable homes for balanced conditions. Here’s a breakdown of how many are needed in the primary areas based on the Northeast Tennessee Association of Realtors® (NETAR) May Home Sales Report.
- Johnson City – 98
- Greeneville – 72
- Kingsport – 52
- Bristol, TN – 40
- Mountain City – 26
- Roan Mountain – 20
- Bristol, VA – 20
- Elizabethton – 18
- Church Hill – 8
- Rogersville – 8
That’s an estimate for the primary community markets, so the total was adjusted to include county properties. And it’s dynamic – meaning the total will change as homes come on and off the market and local wages increase or decrease.
Last year, a little over 500 new homes were added to the local market. The number should increase this year. But don’t expect a surge of affordable homes given current conditions. It’s also unlikely existing owners will put that many homes on the market at affordable prices.
So, what and potential buyers do? The best advice is to get their credit score as high as possible, save as much as they can for a bigger down payment, and set a reasonable expectation. Last, but not least, is partnering with a professional Realtor® who can help them navigate the market and ferret out opportunities.
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 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us