Tri-Cities residents bought 60 new homes in September, one fewer than last year. The homes were more affordable because they were smaller. Builders began reducing the size of their products earlier in the year to be more competitive as housing affordability continued to squeeze both the new and existing home markets.

Builder confidence in the market for new single-family homes made a small increase last month, but affordability is still a challenge.

The median sales price last month was $349,516, down from $378,325 last year. While buyers paid a smaller total bill, they were paying more per square foot. The median last month was $197.36 per sq. ft. Last year it was $190.78.

While demand in the overall market was declining, it was improving in the new home section. The median days on the market for homes that sold last month was 98 down from 123 days September last year.

The regional new home inventory closed the third quarter at 3.7 months.

One of the big changes in last month’s market was the distribution of sales. Johnson City had the most sales (12) while Kingsport, which dominated the new home market this time last year with 22 sales, dropped to six sales.

Jonesborough also gained market share with nine sales compared to five last year. So did Greeneville with 10 sales, up from nine last year.

 Although builder confidence is up, the cost of construction remains elevated in relation to household budgets. And if the existing home market improves as expected, builders will face more competition from the existing home sector as the mortgage rate lock-in effect eases with lower mortgage rates.

In mid-October there were 221 active new construction listings in the counties monitored by the Northeast Tennessee Associaiton of Realtors (NETAR).

OUTLOOK – New home starts are expected to pick up next year. Fannie Mae expected starts to be up 1.4% while the Mortgage Bankers Association is forecasting a 4.4% increase.

Locally, look for the Twin Cities market to perk up.

Don’t bank on mortgage rates declining. National Association of Realtors (NAR) Chief Economist Lawrence Yun says that even with more anticipated interest rate cuts by the Fed expect the benchmark 30-year fixed rate not to deviate too much from the new normal of 6%.