Higher home prices shutting out some buyers
Lawrence Yun, NAR’s chief economist, recently commented on a CNN report that more supply is needed at the lower end of the market to achieve more “equitable distribution of housing wealth.”
The observation is spot on and applies to the availability and affordability of the local market just as much as the U.S. market reports.
January’s typical existing home sales price was $189,450, up 7.6% from last year. Typical is the middle point of the market. The average sales price was a little over $57,000 higher. The average is higher for several reasons. Almost a third of active inventory is in the upper range for our market ($300,000 and above. And more than half of that is over $500,000).
If you look at the typical – or median sales price – as the affordability zone, it accounts for 6.7% of the active inventory and 7% of the new listings.
That’s putting buyers looking for affordable homes – most first-time buyers are in that class – in direct competition with cash buyers. And many, if not most of those cash buyers are investors targeting the more affordable homes to flip or rent.
Local cash sales have dropped to a decade low but still account for about one-third of existing home sales.
But even with last year’s higher prices, the number of institutional purchases more than doubled from 2019 and 2020 levels. Institutional purchases are defined as sales to non-lending buyers who bought at least 10 properties in a calendar year. Last year they accounted for about 4% of existing-home sales. And, at last count, there were a little over 60,000 single-family rentals in the Tri-Cities.
Some of the new housing under construction is close to the affordable range, but most aren’t. And as January’s active inventory and new listing comparison show, the same situation exists for the existing home inventory. The only option dominating the affordability zone is single-wide manufactured homes.
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 1,800+ 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