By KRISTI BAILEY
Low-interest rates and high consumer demand sent Northeast Tennessee home sales soaring in June and July, and a forward-looking indicator says it is not over yet.
July was one of the strongest months for pending home sales that the area housing market has seen in five years, and the raw numbers were the highest since the Northeast Tennessee Association of REALTORS® (NETAR) launched its pending sales index in 2015. Sellers accepted 980 contracts last month. That was a 10% increase from June, and June was a 28% increase from May.
New contracts did not fall off the cliff like the rest of the economy when COVID-19 began dominating headlines in mid-March and April, but consumers did pump the brakes temporarily. There was a lull that put the market on a downward slide for about two months. It bottomed out in May, and the market took off again.
Since new approved contracts – also known as pending sales – are one of the few forward-looking housing market indicators, so market insiders pay a lot of attention to them. They are a leading indicator because sales go under contract anywhere from 30 to 60 days before they close. In other words, the current month’s pending sales is a heads up for what closing numbers will look like for the following two months.
July was the best single month for residential resale closings since 2008, when NETAR began tracking the local market for its Trends Report. There were 818 closings in July, up from 802 in June. These are the only months when there have been 800 or more closings. Given current conditions, August’s closings will be right there with them.
The housing market typically begins to slow down as it hits the fall season. There have been two exceptions. In both 2017 and 2018, the market spiked in October. Some contracts accepted in the last weeks of July will be moving to closing in early September, and it’s a little too early to speculate about what numbers will look like beyond that.
What it is not too early to speculate about the strength of the local recovery since that March-April swoon. If you put it on a chart, it is the sharp “V” recovery National Association of REALOTRS® (NAR) Chief Economist Lawrence Yun predicted.
The current national outlook is for a 4% annual increase for home sales. Locally, July’s annualized sales point to a 4.3 % increase. That should increase with another month of 800 plus closings in August. Last year’s annual growth was 6.5%. It was a two-point plus increase from the 2017 and 2018 yearly increases.
With the August and September pending sales, a good indicator of market behavior for the rest of the year will be days on market. When properties begin to linger on the market, it is a sign of some slowing down. Currently, consumers are snapping up properties quickly, especially in the mid-price ranges. The continuous days on market for a July resale were 57 days. That means half of the sales spent less time on the market and half spend more—all good signs of a hot market.