If you want to get an edge on what this year’s housing market will look like as we head into the prime season, the metric that stands out is the relationship between pending sales and active inventory.  

Sales have stabilized almost to a pre-pandemic level and the price growth rate has slowed, for now. It looks like a good starting point for the housing revival forecasters expect in 2025.  

Here’s the baseline. Current inventory is 34% (1062 listings) below its 2018 pre-pandemic level – the last period for local balanced market conditions across the entire region. Another way to look at it is: We have a little more than three months of inventory on the market. That’s how long it would take to sell everything listed at December’s sales pace. It’s also the best inventory we’ve seen in four years. 

Active inventory is slowly increasing, but the big question is how the demand side will behave. Two primary moving parts behind an answer are: 

• How will mortgage rates behave? The current average for a 30-year fixed-rate mortgage is almost 7%. A decrease is expected, and the consensus outlook is for 6% to 6.5%.  

• The second part is demographics. Millennials are well into their prime home-buying years, and the eldest GenZers on the threshold. Combined, they make up the largest share of the Tri-Cities population. And their numbers represent a lot of pent-up demand. National Association of Realtors research estimates that there are at least 10,000 potential new owners still on the market sidelines. Another factor is new residents. The numbers have softened from the 2020 new-resident tsunami, but the in-migration is still significant and a critical element for the region’s population. Without the steady flow of new residents, the region would face a population and economic decline. The downside is affordability and the number of starter homes. Lower mortgage rates will ease some of the affordability bite. 

The inventory situation at the end of December offers optimism for an early start to the Spring market. There were 2,029 active listings. It needed another 1,062 listings to be at the bottom level for balanced conditions. Looking at the inventory by price tiers in mid-December shows all four of the regions’ areas are at or very near balanced conditions in the $300K-$399,999 price range. That’s significant because it’s the pricing sweet spot given current market conditions.  

Early last year, local market watchers began tracking a very slow increase in active inventory as a sign that natural market forces would take some of the sizzle out of real estate. It began when new listings outnumbered pending sales. It signaled a market dynamic where active inventory was slowly increasing because of a slight, but significant shift in the local supply-demand dynamic. 

Lack of inventory isn’t just a NE Tenn. – SW Va. challenge. It’s especially true because our market saw too little new home construction in the wake of the housing crash during the Great Recession. Complicating the situation, many of the region’s senior builders decided not to resume business at the end of the recession.  

Locally, new home construction peaked in 2005. Although builders have ramped up to meet demand, the new home industry – as measured by new home permits – is not performing at the peak performance level. That doesn’t mean developments are anemic. They can be seen area wide, and the momentum is expanding.  

Tracking this year’s active inventory, pending sales v. new listings ratios and other metrics that identify trends and market niches trumps anything that mass media pundits have to say about what’s happening in the region’s housing market. And the best source for that local knowledge is NETAR’s monthly and weekly market reports and the local Realtors® who keep their fingers on the market’s pulse.