December 9, 2018

Local housing market isn’t crashing, how we got here, where we’re headed


If buyers and sellers are stressing out over the housing market noise level then they stand a real chance of losing out on what will likely be a pretty good market next year.

Aaron Taylor
2018 NETAR President

That doesn’t mean the local market will be status quo either. Make a note of the word local. That’s what anyone serious about the real estate market will keep an eye on. Look at it this way. If you’re going on vacation to Charleston, you won't check the weather in Washington, D.C. The same holds for local housing market conditions.

And don’t put too much faith in the often-cited norm that the local economy trails the national economy by six months.  Sometimes that’s true, much of the time it isn’t.

During a conference at the Tennessee State Data Center, Dr. Bill Fox was asked to comment about some specific economic conditions in Northeast Tennessee in relation to the state economy. Dr. Fox, director of UT’s Boyd Center for Business and Economic Research, grinned and passed on a bit of wisdom. He said Northeast Tennessee is somewhat of an economic entity to itself. It doesn’t track well with the rest of the state. That’s right. We’re unique so quit obsessing about Nashville.

To get a handle on the realities of what’s now happening and what next year’s market will likely be you have to invest in a little market history. The 11-county region monitored by the Northeast Tennessee Association of Realtors® (NETAR) Trends Report has posted annual single-family sales increases every year since 2011. The best year was 2016 when that annual increase was 15.3 percent. Most annual increases were in the 2 and 3 percent range. This year’s market is still hot.  October’s annualized sales point to an increase that should be about 9 percent.

If mortgage rates hit and exceed 5 percent, which they are projected to do, it would reduce sales by an estimated 10 percent, according to the National Association of Realtors®.  But even if sales drop by 10 percent from this year’s annualized total, they would be about what they were in 2016.

Price is another matter. The local average sales price has been positive five of the past nine years. It has been in the 2.3 percent to 3.6 percent range for the past three years. October’s annualized average sales price points to about 4 percent.

If you look at the trends data sales have started correcting. Growth is still positive, but the growth rate is softer.

It doesn’t look like the inventory situation will change much next year. New residential permit for single-family homes were down 16 percent in the third quarter. So fewer new homes are being built, and the local average cost is up about $10,000.

So, what are buyers are sellers supposed to do?

They need to focus on long-term strategy and make decisions that they can afford. Let’s face it. What consumers see on HGTV is more about entertainment than anything else.

And they need to be ready to seize opportunity when it presents itself. Next year’s market won’t be as kind to sellers, but it won’t be a buyer’s market either. The watchword will be working value into  ong-term buying and selling strategies.

Buyers and sellers will be even more reliant on trained professionals next year to guide them through the process and to accurately report the market’s pulse. Not only is the market and economy changing, new technologies and regulations have and will continue to be added. That makes partnering with a professional Realtor® a cornerstone to any real estate transaction.