Mid-year 2022 – The State of the Local Housing Market
Most mid-year trend indicators point toward a slowing housing market for the last half of 2022. There are some good and some not-so-good outlooks for buyers and sellers.
Higher mortgage rates, housing unaffordability, an unyielding inflation rate, and a flagging stock market is nudging housing off its frenzied pace. The market is at an inflection point. But if nothing else, this year’s watchword has been to expect the unexpected.
So far this year, there have been 154 fewer closings than last year’s first half. That’s a 3.3% decrease. The market is averaging 729 sales a month – down from last year’s average of 764 a month.
Realtor.com’s economists expect sales to decline by 6.7%. If that outlook held for the local market, 2022 would be the second-best sales year ever. The all-time best was 2021, when the region monitored by the Northeast Tennessee Association of Realtors® (NETAR) had 9,999 sales.
Price is one area where there has been variance with neighboring markets and the expert’s outlooks.
The typical sales price at the end of June was $225,000. It was $187,500 during the first half of last year, so the region has a mid-year 20% price growth rate. And that’s not a major skew from higher-priced homes.
The region-wide average sales price is $270,897, up 17% from last year. The relationship between the median and average price growth rates point to a structural price change in the market. Home sales in the $200,000 and below price range used to dominate the region. That market share has dropped from over 70% of all sales a couple years ago to 38% in June.
Price conditions are similar in all but two of the region’s 15 city and community submarkets. The six-month typical price trend is above $200,000 in all but four markets, and the mid-year growth rate is in the double-digit range in all but two submarkets.
Affordability will continue weighing on the price trend during the last half of the year. At the end of the second quarter, the average monthly payment for a median-priced home in Sullivan Co. was 50% higher than last year. It was up 36% in the Washington Co. market.
New listings increased five months this year, and the one dip was only by 49 new listings. Those new listings have also outnumbered new pending sales half the time. So, active inventory is increasing but at a snail’s pace. The region had a 1.3-month supply of homes on the market at the end of June. It’s the best so far this year, but not quite even with last year.
Builders have stepped up construction, and some of it will be on the market later in the year. But it won’t be enough to significantly increase the number of homes for sale.
The housing market led Northeast Tenn. and SW Va. economies out of the pandemic. By May, the region has recovered the jobs lost to the pandemic and added new jobs while struggling with a labor shortage. Housing has also been one of the contributors to inflation, and as the market cools, some of the economic benefits it afforded will diminish.
That means the labor market and wages will have a bigger role in what happens in the housing market.
So far this year, employers are adding an average of 420 nonfarm jobs a month. A concern is wages. The national projection for raises this year is 4.5% for workers who have stayed on the job. Applied locally, that would be less than last year’s increases. The private-sector average salary in the Johnson City metro area last year was up 5.5% and up 7.8% in the Kingsport-Bristol metro area. Local wage increases have not equaled home price increases since 2017.
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 1,800+ 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