News
October 10, 2016

Housing leads the economy in recovery from recession

By MARSHA STOWELL

Home sales have been moving at a rapid pace for the past 12 months.  A common experience for many real estate professionals at social or community functions is someone leaning in close and asking, “How’s the market doing?”

It’s easy to understand what drives the question. There’s a torrent of information bombarding the public about what’s happening, what isn’t happening and what may happen to the economy. For many, a vision of housing’s role in the economy is a little blurry. It's also something that isn't very high on most consumers' radar unless they are looking to buy or sell some real estate.  For those who keep their finger on the pulse of the economy there’s a housing back story that doesn’t get much attention.

Dr. Lawrence Yun talked about that back story recently during a talk to the Bristol TNVA and SWVA Associations of Relators. He pointed out that if it were not for the robust housing market that now exists the U. S. economy would be in recession. Yun is a reliable source. He’s the chief economist and senior vice president for research at the National Association of Realtors. He’s also a Bloomberg columnist and recognized as one of the top economist in the nation.

Yun made a solid case for his observation on the national level, and while the local housing economy hasn’t seen as robust an overall recovery, it has and continues to lead the Tri-Cities recovery. Three primary economic indicators help tell the story.

The Northeast Tennessee Association Trends Report shows home sales have moved well past the precession level. While the average price is also past the 2008 benchmark its progress has been more conservative than sales.  That’s the “normal market condition” for the Northeast Tennessee region. Home price indexes from CoreLogic tell the same story. While the new home and commercial real estate sectors have yet to reach pre-recession levels, they are making solid gains.

Compare that to the local labor market.  The good news is job creation is tracking the national jobs recovery, but the growth rate has been slow. Currently, jobs are still 2,000 shy of what they were before the recession.

Like job creation, payroll growth has also been sluggish, especially in the Johnson City metro area.

 Local consumers like their national counterparts have tapped credit lines for much of their spending. That and the boost lower gasoline prices have helped push sales tax collections to pre-recession levels.  The same can’t be said for regional retail sales. Even with the successes of the Pinnacle, Bristol’s retail sales volume was below their 2008 levels at the end of the year. Only Kingsport has seen retail sales volumes at pre-recession levels.

Although they are usually seen as negative indicators, the delinquent mortgage and foreclosure rates also have a positive story worthy of note.

Area foreclosure rates have been below one percent for since the summer of 2014. Like home sales, foreclosures are at pre-recession levels.

 There are still foreclosures on the market, but discount rates are down and the average sales prices have increased.  Those lower discounts and higher sales averages have eased the downward pressures that non-stressed properties command.

The delinquent mortgage rate trend is also trending lower.  The lower that rate, the stronger the market because there are fewer potential stressed sales on the horizon when delinquent mortgages become foreclosures or short-sales.

Here’s what that says about the health of the local market.

The percentage of Tri-Cities homes with outstanding mortgages 90-days or more delinquent has been slowly, but steadily, declining since they peaked in 2010.

Currently the delinquent mortgage rate in the Kingsport-Bristol-Bristol metro area is a little over two points lower than it was in January 2009. In the Johnson City metro rate is almost two percent lower.

Lumping all that information together and looking at the broader picture it paints is something Dr. Yun encourages to see and appreciate the role of housing on the local economy.

Marsha Stowell is the 2016 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 1,000 local Realtor® members and almost 60 affiliates

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