Affordability, inflation key to market’s year-end performance
GRAY, Tenn. – Buyers still have to contend with a sellers’ market, but their bargaining position is getting better, especially in the move-up market’s sweet spot – $300K-$399,999K.
June sweet spot sales accounted for 25% of all move-up sales. And a little over half of them (53%) were sold at a discount. The median discount was $9,900.
During the 12 months ending in mid-June, there were 4.1 months of inventory in the $300K-$399,999K price range. That’s the bottom range of balanced market conditions. But the balance is not evenly dispersed. Half of the region’s major markets – Greeneville and Kingsport – are there while the Johnson City region and the Twin Cities are still lagging.
So far, the only price ranges still lagging balanced conditions are those in the affordable and work force housing sectors – $200K-$299,999K and below.
A big question as the market moved past the mid-year point is: What would it take for inventory to build enough to nudge the full market to balanced conditions?
If mortgage rates stabilize and show some decline, demand will increase, inventory will shrink. That would continue exerting upward pressure on prices. However, if rates increase, demand will continue slowing, giving inventory some breathing room.
Mortgage rates jumped to an 8-month high in the first week of July. The 30-year fixed rate was 7.22% driven by strong economic data and expectations that the FED will keep raising interest rates.
The National Association of Realtors (NAR) outlook is rates will gradually decline and could be about 6% by year’s end. Realtor.com’s economists have the same opinion as does the Mortgage Bankers Association. However, the FED is looking to at least two more interest rate increases in its inflation fight.
Affordability and inventory are the key signals to watch for market for the rest of the year. Affordability continues to decline, and inventory is flat with some exceptions in the move-up and luxury markets.
June sales in the affordable market were down 10.4% from last year.
Move-up market sales were up 8.9% led by those in the $300K-$399,999K price range.
The luxury market was flat with a 1.1% gain.
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