Home Sales Price Increase as Growth Rate Slows
By KRISTI BAILEY
The average Northeast Tennessee home sales price hit a new high in September. It was $218,438. That is 20.7% more than it was in September last year. That is excellent news for sellers. Financially, they have never had it this good. The main reasons are the record-low mortgage rates and a record-low inventory of homes. It is the basics of economics 101 – High demand + limited supply = higher prices. The low mortgage rates are a force multiplier because it significantly boosts consumers’ buying power. No one expects a significant immediate price decline. But sooner or later, those record-low mortgages will not offset higher home prices in a market where wages are not keeping pace with home price increases.
September’s Northeast Tennessee Association of REALTORS® (NETAR) Pending Sales Report and Home Sales Report offers some context to the situation. The pending sales report is a closely watched metric because it is one of the few forward-looking reports. The second metric is this year’s median sales price trend, which is significant because the median sales price is a better statistic since it shows what price is selling the most. New pending sales were softer for the second straight month in September. Although new contracts declined last month, September had the third-highest monthly total since last year. While the market is still on a record pace, there is a little bit of a seasonal slowing.
Like the average sales price, the median price has posted a very strong year. It was 20% higher in September than it was in January. But, like the pending sales, the growth rate is slowing. July’s median was $179,500. It increased to $180,000 in August and didn’t move in September. Also noteworthy is the new listings trend compared to new pending sales. So far this year, new pending sales have absorbed 7,165 of the 7,190 new listings. New listings are down 11.9% from the first nine months of last year, while new pending sales are up 13.9%. The only way to see any price relief is an increase in inventory.
Local builders have significantly ramped up production to keep up with demand. According to Builder Magazine, there have been 955 Tri-Cities new home closing as of the end of July. That is an increase of 103 over the same period last year. It is a welcome increase in inventory, but not enough to keep up with the current demand level, much less providing some relief to the overall home for sales inventory. It’s currently down by almost half from last year.
No one is stepping up to predict when the local home price appreciation trend will peak, but there are signs that prices are still increasing; the growth rate is beginning to ease up.
NETAR is the voice for real estate in Northeast Tennessee. It’s the largest trade association in 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.