January 13, 2019

Local housing affordability declines, but there is a silver lining to the story


Housing affordability suffered a loss in Sullivan and Washington counties last year. It was a tradeoff to two-and-a-half years of record sales and some solid price appreciation.  Even with the decline, our marketplace has not joined the ranks of communities where the average family cannot afford to buy a home.  

Karen Randolph
2019 NETAR President

According to Attom Data Solution, affordability was at an eleven-year low in Sullivan and a nine-year low in Washington County at the end of 2018. Nationwide, affordability was at a ten-year low.  Realtors®, economic developers and economists are not liking the sound of this news. Housing affordability and jobs are the heartbeat of every local economy.  They are critical factors in attracting new residents.

Here is where the local silver lining comes into play.  Even though affordability declined, Sullivan and Washington counties were among the 5 of 13 Tennessee counties analyzed where the average wage earner can afford to buy a home.

Since the bottom of the recession in 2011, the November average sales price of a single-family home in Sullivan County has increased by 26 percent - an improvement of $47,389.  The average price in Washington County was a 27.8 percent increase - a gain of $49,718.

The most current Home Price Index shows 20.2 percent of the median wage in Sullivan County during Q4 to buy a median-priced home compared to the historic wage share of 17.2 percent.  The annual income needed to buy was $34,495. These numbers assume 3 percent down and a 28 percent front-end debt-to-income ratio. The median payment was $805.

In Washington County, the wages needed to buy was 27.5 percent, up from its historic share of 26.5 percent. The annual income – assuming 3 percent down and a 28 percent front-end debt ratio – was $40,469. The median payment was $944.

Record-level sales in 2018 absorbed much of the housing inventory – especially homes priced up to $200,000, which accounts for over 70 percent of all resales.  The availability of the median priced home has been more of an issue than affordability.  Inventory is projected to increase in 2019, but not expected to go back to the levels we saw three years ago. If the market produces an influx of inventory, a transition from one favoring sellers to one where buyers and sellers have more of an equal footing will be the outcome.  Supply and demand continue to rule the market.

Higher mortgage rates will prompt a slowing of the economy and will soften existing home sales. So far, the higher mortgage rates have not materialized and although the home sales growth rate is slowing, total sales are increasing.

Two key factors real estate professionals will be watching in the coming months are local wage growth and the number of new residents. Our rapidly aging population is becoming an increasingly important driver of the housing market and local economy. Currently, it is estimated that 18 Tri-Cities residents celebrate their 70th birthday every day. Since the local death rate is higher than the birth rate, the only way to sustain or increase population is attracting new residents. Affordable housing is a critical factor in the region’s growth potential.