The local housing market started 2020 the same way it ended 2019 – with a bang.
January resales were up 16.5%, and there was a tidy 3.3% sales price appreciation. There was even an increase in active listings. It has been so long since the active listing count has been positive; even a small increase is good news. Before we make too much of that small listing bump, it is important to remember that our overall inventory picture has not changed much from last year.
While increasing sales and prices are good news, there is no way around the fact that we do not have balanced market conditions. There are several descriptions for balanced market conditions. The most common is about six months of inventory. This situation was discussed in detail a couple of weeks ago in “Housing metrics signal: Now is an excellent time to sell,” which is available on the NETAR website at https://netar.us/news/housing-market-metrics-signal-now-excellent-time-sell.
Townhome and condominium resales outperformed January’s single-family detached market with a 50% increase in closings. 2020 will likely see more activity in this subsector. Increasing demand and less inventory have pushed prices for single-family detached homes beyond the affordability range for many buyers. That puts townhomes and condos in the spotlight. Last year there were almost 600 townhome/condo resales – up 5.6% from the previous year. The average sales price of $133,628 was a 5.1% annual increase.
The Federal Housing Administration (FHA) rules for townhome/condo loans were also sweetened to make them more attractive to first-time buyers. The Catch-22 is the inventory situation is as tight for townhomes and condos as it is for single-family detached homes. Still, the market is absorbing townhome/condos at a faster rate. Last month the average days on the market for a townhome/condo resale were 89 days compared to 121 for single-family detached resales.
Another plus for the market is momentum in the new home market is picking up. That is welcome news on several fronts. Unlike the existing home market, the new home sector has seen only slow growth. For example, in 2018, there were more flip sales than new home sales. Locally and nationwide, there is an acknowledgment that part of the challenge facing housing today is the lack of new home construction during the early years of the recovery. Until now, new home construction has been at about half of its pre-recession capacity. That will likely pick up this year. More new homes will help increase existing home inventory as some buyers trade up and others scale down.
Are there some issues that might hinder our local market? Certainly. The market typically slows down during a presidential election. There are also concerns about how the coronavirus will affect both supply lines and consumer confidence. The bottom line is that this year is stacking up to be even more complex. And if January is any indication, the local market shows little signs of pausing to catch its breath.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in Northeast Tennessee representing over 1,300 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics are available on the NETAR website at https://netar.us/voice-real-estate-northeast-tennessee.