July 29, 2017

May's housing report dovetails with core issues of National Homeownership Month


It is fitting that the May Trends Report came out just in time for the June recognition of National Homeownership Month.

It is fitting because after lagging record-level home sales for two years prices are beginning to climb. There's no way around the fact that higher home prices usually result in lower affordability. However, while that is an issue in some markets, it is not as much of an issue here. It is not as much an issue because both private sector and total wages have paced or are increasing faster than home prices. For example, May's five-month average single-family home sales price is 4.3% higher than last year. Prices were 2.3% higher last year and 3% higher in 2015.

Bureau of Labor Statistics reports show total worker's wages have increased less than that in some local counties and more in others. For instance, the most current report shows total wages are up 5.1% in Carter County and 5.3% in Washington County, TN.  Hawkins County wages are up 7.3% while Sullivan County wages are up 2.1% and Washington County VA workers are seeing a 4.5% increase. While the increases may vary from county-to-county overall wages in the region, have kept pace with or increased faster than home prices.

It has been and still is a fact that a family earning the median household wage in the Tri-Cities region can buy a median-priced home where they live and have a mortgage payment that is less than the average cost of renting.

In fact, the biggest local challenge to affordable homeownership is a tight inventory - not price.  According to the Trends Report, there was a six-month inventory of homes on the market in May. From an industry standard that's a normal market. But a nine-to-10-month inventory has been the traditional norm.

Recently the National Association of Counties (NACo) did an economic recovery update based on four key economic indicators. In our region, the study showed that the housing industry and home prices had recovered in every county.

The local housing sector led the local economy out of the Great Recession, and it continues to outperform some other sectors. Last year, sales of single-family and townhomes totaled a little more than $1 billion. And that was just the residential properties listed on the local Multiple Listing Service. Another 20% or so of the residential market is not included in that number. It also doesn't include commercial real estate new construction and commercial sales.

According to a study by the Harvard Joint Center for Housing Studies and Bureau of Economic Analysis at the National Association of Realtors the real estate industry accounts for 14.7% of the Tennessee Gross State Product. The study also found that the total income derived from the sale of a median-priced home was an additional $46,194. Multiply that by the 6,096 area home sales the Trends Report recorded last year and the economic impact on the local economy gains some context.

Those are just the economic impacts. Americans overwhelmingly believe owning a home is a good financial decision. From fostering communities to building personal wealth over the long term, and driving the national economy, the value of homeownership is indisputable.

America’s oldest core value is homeownership. That is why Realtors® participate in the political process; to ensure the voice of the homeowner is heard at all levels of government. Advocating for homeowners, we get to show this divided world what is like to put aside partisan issues and focus on something that really matters.  We stand shoulder to shoulder with our peers, speaking with one voice, fighting to ensure the American Dream remains intact because it is fundamental to the economic, civic and social makeup of our communities.

Eric Kistner is the 2017 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 1,200 local Realtor® members and over 100 affiliates.