Move-up market slowly moves to balanced conditions
GRAY – The NE TN – SW VA housing market is slowly moving toward balanced market conditions in the move-up market. That market segment has two price bands – $300K-$399,999 and $400K-$499,999.
During the 12 months ending in mid-June one (Greeneville) of the region’s four primary market regions had the typical definitions of balanced conditions, with 6.9 months of inventory in the $300K-$399,999 sweet spot. The other three were in the 2.8 months to 4.7 months range. Area wide inventory in that price range is 4.1 months.
The $400K-$499,999 range inventory has moved up to the 4-month plus inventory range in all the area markets except the Twin Cities.
Five to six months inventory is the industry benchmark for balanced conditions, but of late, some analysts argue that 4 months inventory is a more realistic number.
Balanced market conditions are important because it’s the dynamic where neither buyers nor sellers have big advantages. It’s a dynamic where prices reflect their true values. And the true local value is a big question mark for some.
Currently, the region’s median sales price has been in the $220,000 to $255,000 range for over a year, and unlike the number of home sales, it has not declined. One point of view is the price increase during the last three years reflects an evolution of the local market from its previous status as an undervalued market.
The market segment where inventory remains stagnant and at an unhealthy level is the affordable and workforce housing level of $180K to $249,999. It’s unhealthy because it’s the level that most closely matches the buying power of most of the region’s new jobs.
Existing home inventory growth is being hampered because more than half of the current owners have mortgages at a rate below 4%. That makes them reluctant to jump into a market where new mortgages are going out the door at 7% to 7.5%.
Homebuilding momentum is picking up. In May it was up about 20%, but the addition of affordable and work-force housing lags construction in the affordable and work-force housing price ranges.
The headwinds to increasing the affordable and workforce housing inventory are varied. While some of the supply chain and material costs issues are moderating, there’s still a labor shortage and there’s public push back on changes that will help builders offer more products with lower price points.
The disparity between wage increases and home price increases also continues to be an issue.
Housing construction peaks have historically moved in 20-year cycles. The local peak was in 2006 and the current level has moved a little past the halfway to a peak level. However, the momentum is increasing.
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 1,600+ 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