December 24, 2017

2017 a banner year for local condo sales and the overall housing market


Condominium and townhome sales are not very high on the housing market watch list here in Northeast Tennessee. The focus has always been on the traditional single-family residential market. But condo and townhome sales are making themselves heard.

Closings in October were almost 60% better than October last year. And in November they were up a little over 85%. Yes, the total number of condo and townhome sales remains a distant cousin to single-family sales, but when the sales pace begins increasing by double digits, it gets market watchers' attention. Especially when they push the market past last year's annual levels a month early.

And October and November are not the only stand-out months. January was up 26%. February posted a 25% increase. April was up 50%; May up 22%; June up 48%; and July up 21%.

2017 NETAR President

During the first 11 months of this year were 545 condo and townhome closing. That's 109 more than the same period last year and a solid 25% sales increase. The year-to-date single-family sales were up 2.9% in November. And while single-family average prices are up almost 5% this year, condo and townhome average prices are up only 0.5%. Condo sales prices have held steady in the mid $120,000 range. More units were sold, but there was not much price appreciation.

This isn't an argument that a condo or townhome is better than a traditional single-family home. And they sure are not as evenly distributed as their single-family cousins. But they are an important part of a larger picture that illustrates the dynamics of the local housing market. That big picture shows the combined sales have already made 2017 another record year for our region.

Together traditional single-family, condo, and townhome closings are almost 300 higher than this time last year. And the combined sales volumes have moved the market past last year's $1.04 billion mark. That means when the December Northeast Tennessee Association of Realtors®' (NETAR) Trends Report comes out everything from December is icing on the cake.

And here's another big picture consideration.  Although construction is the only part of real estate that's measured by Gross Domestic Product (total economic output) its actual reach is much broader. Transactions of existing home sales and the economic activity those sales generate elsewhere in the economy account for an estimated 15% to 18% of GDP. A drill down on those economic factors on the 2016 Northeast Tennessee economy roughly identified a local market impact of 11.5% of the Tri-Cities GDP. The number would have been higher, but we couldn't put a number on some real estate related components.

What that means is the real estate economy is a big player in the local economy. It doesn't generate as much media attention as unemployment rates, but it's a bigger player. It's a bigger player because a home is usually the largest single purchase that an individual or family will make in their lifetime. And for many families, their home represents a major part of their overall wealth. So, when homeowners feel good about their place in the economy, they tend to loosen their purse strings. And that's important when you remember that 70% of the economy is based on consumption.

Real estate also provides a substantial base for employment and entrepreneurship. For example, NETAR has over 1,000 members. It's not your typical payroll employment situation. Most are entrepreneurs because the measure of their worth is determined by the effort and talent they bring to the game.

The National Association of Realtors®' Bureau of Economics says one job is created and maintained in the broader economy for every two typical home sales. The economists at the National Homebuilders' Association have studies that show every new home sale generates and sustains three jobs for a year.

Any way you look at it, the real estate industry – including the sometimes taken for granted condo and townhome component - is a major player in the economy, the cities and counties across the region.

Eric Kistner is the 2017 president of the Northeast Tennessee Association of Realtors. The real estate education and trade group is the voice for real estate in the Tri-Cities and has over 1,250 local Realtor® members and almost 100 affiliates.