January 12, 2020

Don’t expect housing inventory crunch to ease up this year


2020 NETAR President

Many factors affect the housing market. The most critical factor today is a limited inventory. There was a time when ten months of inventory was the benchmark for balanced housing market conditions in the 11 counties monitored by the Northeast Tennessee Association of Realtors (NETAR) Trends Report. File that away in the “that used to be normal” file.

Before we go any further, some explanation is warranted to ensure we cut through the jargon. Months of inventory is the number of months that it would take to sell all properties currently for sale at the average monthly sales pace if nothing else came on the market. This number is extremely important to real estate professionals but of which consumers are not normally aware. It is essential for anyone working or investing in real estate because it is one of the key indicators for those who want to keep their fingers on the pulse of the real estate market.

Things began changing locally in the summer of 2015. It happened a little faster in other markets across the nation. That summer is when the local market stepped out of slow recovery mode. Consumer and investor demand began sucking up existing home inventory at a faster rate. Annual resales were up almost 10 percent in 2015 and soared to a 15.3 percent increase in 2016.

In January 2016, 7.5 months of inventory existed.  By the end of the year, resales had moved past the 6,000 a year mark, and inventory was down to 5.7 months’ worth.

Fast forward to current conditions – there has been less than four months inventory every month since March last year, and that’s for the entire region.  Some city markets have a little more than two months of inventory.

One thing that ransacked inventory was an increase in the highly informed, all-cash buyers. During the third quarter of 2019, 36.7 percent of the resales in the three-county Johnson City metro area were all-cash deals, according to Attom Data Solutions. The all-cash share in the four-county Kingsport-Bristol metro area was 33.6 percent putting first-time and traditional move-up buyers at a competitive disadvantage.

Six to 6.5 months of inventory may still be the benchmark for balanced market conditions in some higher price ranges, but in the local market’s $200,000 and below price range, we are looking at 4 to 4.5 months. This price range accounts for about 70 percent of local resales. But that too is changing. Resales in the $200,000 to $399,999 range increased market share by 3 percent last year while inventory in that price range has dropped to 4 months. New residents moving here and finding a market where than can buy a lot more home with their big buying power fueled by selling their home in more expensive markets is part of the cause.

Here’s what that means for both buyers and sellers in the 2020 market. It is going to be a competitive market, just like it was last year. The new home industry is ramping up production. That will help inventory, but do not expect fast relief. There are also new rules for townhome and condominium buyers targeted to help first-time buyers. Considering the number of those type developments in the works, it will be slow existing home inventory relief.

The conventional first-time and move-up buyers best positioned for the 2020 market will be those who partner with a local-market savvy REALTOR® because you can’t compete in a technology and data-driven market with yesteryear’s tactics.

NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,300 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics are available on the NETAR website at