Housing market stimulates equal shares of frustration
Jan Stapleton - 2023 NETAR President
The housing market is proving itself to be better from an economic perspective than a pleaser for consumers and real estate professionals. From an economic perspective the unstainable pandemic market growth rate has subsided, and prices are stabilizing. From a consumer perspective it’s still a strong seller’s market with a lot of inventory and availability challenges.
April’s home sales were down from March and April last year and the middle-market price inched toward its all-time high set May last year. Realtors® and mortgage originators are frustrated with the lack of inventory. Some lenders have also cinched up standards in the wake of the banking industry’s woes. And there are complaints about deals not passing home inspections and the ever-present complaints about sellers’ expectations.
And during all of this, sellers have not backed off their listing prices. April’s median listing price was $320,00. That’s $70K more than it was this time last year. The median listing price is the middle of the market. Half of the listings are for more and half are for less. The region’s overall average listing price last month was $413,178, up $38,178 from last year.
Here’s how one Facebook user summed it up. “Some of these house prices are astonishing. Split foyer Susan and brick ranch Betty think the house they paid 80k for in the 70s is worth 350-400k now but has never updated the curtains, much less the kitchen, bathrooms, or wood paneling.”
Of course, the listing price is not always the selling price. Last month almost half (41%) of the closed deals were discounted. The median discount was $12,100. And almost one-in-three (30%) deals closed for more than the list price. Half of 145 sellers who got more than list pocketed more than $6,050. The other half got less.
Two of the primary drivers for the stubborn prices are the region’s robust labor market – there are a little over 6,300 more jobs than there was this time last year – and the lack of inventory. April was the 29th consecutive month that the region has had less than two months of inventory. Balanced market conditions are five to six months of inventory.
That’s not just a local issue. Redfin chief economist Daryl Fairweather summed up the situation with a tweet last week that read, “Higher mortgage rates and tougher lending rules have coincided with fewer move-up selling and buying. But that segment of the market is doing better locally that it is on the national level. So far this year sales in the move-up market’s sweet spot ($300K to $399,999) are up 4.7%. The only other price band that’s positive is properties in the $60K to $69,999 price range.
It’s estimated the local inventory situation won’t see significant improvement until next year. That’s when a flurry of new homes should begin hitting the market and competing with existing home sales.
Keys to the Federal Reserve’s inflation fighting effort was to increase interest rates enough to pump the brakes on last year’s uber-hot housing market, consumer spending and the labor market. They succeeded in capping the housing market, and consumer spending is begging to ease. But the housing market gains are stubbornly high.
So why is the hot mess of today’s housing market a better economic situation? Home prices have appreciated from yesteryear’s low levels. Owners – even those having money problems – have seen hefty equity increases that’s helping keep the local delinquency and foreclosure rates are record lows. The local housing market and its fundamentals have matured. Home prices here are still a bargain when compared to other markets but given current conditions there’s won’t be much price retreat. Instead look for a small average increase by years’ end.
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