News
September 15, 2019

High demand drives the housing market to new norms – commuters are a factor

By KAREN RANDOLPH

Here is a puzzle that has some housing market watchers scratching their heads.


KAREN RANDOLPH
2019 NETAR President

What is driving four years of record-setting single-family homes sales, pushed the average sales price to an all-time high and created a market where 4 months of inventory has replaced the 10 to the 11-months local norm?

The normal drivers of housing demand are population and job growth. Neither have been strong enough to explain the red-hot home sales.

The current projection for the region’s population growth is 0.2 percent. While job creation is on track to finally reach pre-recession levels, it’s a late entry on the recovery timeline.  New household formations are also on a slow-growth track, so that leaves pent-up demand as a major driver.

Here is where we are today and some background.

Home sales in the 11-county area monitored by the Northeast Tennessee Association of Realtor's® (NETAR) Trends Reports took off like a rocket in mid-2015. Things have not letup since then.

Last year saw 6,592 single-family homes sold. It was also the third year the regional sales volume from single-family, townhomes and condominiums resales were more than $1 billion.  When you add commercial sales and factor in the economic multipliers for residential resales, the total real estate impact on the regional economy last year was an estimated $2.3 billion, according to the Tri-Cities Appalachian Highlands Dashboard for Real Estate Analytics.

Although long-term trend indicators show the sales growth rate is beginning to soften, the market is still on track for another record this year.  Bolstering that outlook is NETAR's Pending Sales Index – a forward looking market indicator – which was at a 28-month high in July.

Although not a traditional housing demand driver, commuter patterns is also a factor in what is happening in the real estate industry because housing demand is heavily influenced by access to job opportunities and affordability.

Here is the big picture: about 47,000 Tri-Cities workers get up and commute from where they live to their jobs in other communities every morning.

Here is what the commuter exodus looks like, according to Census data. It is based on the percentage of employed people in each city who commute to another local city.

  • Bristol, VA - 71.6%.
  • Bristol, TN - 78.3%.
  • Elizabethton - 76.2%.
  • Erwin - 70.8%.
  • Greeneville - 46.5%.
  • Johnson City - 54.1%.
  • Kingsport- 55.5%.

Every year, some of those people pick up and move closer to where they work.

There is not a quick or single answer to what's driving local housing demand. It is what it is.  There's no quick remedy for the housing inventory issue. New permits across the region were up 2 percent at mid-year, and there are several new housing developments under way or will soon be under way. These developments mean more new home options, and more new home inventory adds to the existing home inventory.  It is still a market with dynamics unlike what any local real estate professionals have seen. This current market is a place where the expertise of professional Realtors® is a critical factor to find and seize the best opportunities as they develop in this new fast-paced housing market.

NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,200 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 can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee .

 

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