News
November 26, 2017

NE Tenn. housing market shows signs of fatigue, but it keeps moving up.

By ERIC KISTNER

There were signs of fatigue in October's housing market report. After three months of barely staying ahead of last year's monthly sales totals the market posted a very respectful 50-home bump. It put the 11-county region monitored by the Northeast Tennessee Association of Realtors® Trends Report within 815 sales of last year's annual total. Unless sales fall of the cliff, 2018 will be yet another high point.


ERIC KISNER
2017 NETAR President

The downside to October was the average sales price ran out of steam. It was down for the first time since September last year.

Those year-over-year movements get a lot of attention, but year-to-date sales and prices are what market hawks watch. And what they see looks pretty good.

Going into the fourth quarter sales are 2.5% better than last year, and the average sales price is up 4.7%. That's an average increase of $7,535 per sale. After adjusting for inflation, the sales price is up 2.7%. That's better than double the 1% inflation adjusted annual increase last year and within a fraction of a point from the 2015 annual increase.

That's a pretty good report card for a market that has experienced some of the tightest inventory conditions many local real estate professionals remember. Typically, our housing market has about 10 months or so inventory at any given month; but that has only been a memory for about two years. During the past year, the highest was in March when we had 8.4 months. In October it was down to 5 months.  Months of inventory is the number of months it would take to exhaust active listing at the current month's sales rate.

And when you drill down to the price range of homes selling an even more detailed picture emerges.

Homes in the $200,000 and below price range are the bread and butter for Northeast Tennessee's existing home sales market. Historically they account for more than 70% of sales. During the 12 months ending in October that price range's market share was 72%, down from 78%. That was a difference of 10 sales.

Move up a price tier to the $200,000 to $399,999 range, and you see one big factor in the average price increases we've seen. During the 12 months ending in October, there were 217 more sales than the previous year.

Move up another price tier to the $400,000 to $599,999 range, and you see there were 34 more sales.

Than doesn't necessarily mean sales in the $200,000 and below range didn't increase. Sellers saw a proportional increase because the across the board average listing and sales price has been steadily increasing.

The supply side is where the rub – and the buyer fatigue – is beginning to take some toll.

October's inventory in the $200,000 and below range was 58% of listing, down 10% from October last year. Listing in the $200,000 to $399,999 range were down 3%. This supply squeeze and the increased competition is tiring for buyers. Ditto for their agents. It's emotionally draining if you have to look for the right home then lose it a couple of times.  This and the tight inventory also sets up a condition where a growing number of the homes in the primary price range are not as compelling as they were a year ago.

Buyer fatigue hasn't reached the point where it's a major factor, yet, and some of it is seasonal. There should be some relief after the holidays when sellers begin gearing up for the 2018 prime selling season. The fresh inventory that change brings will be a boost that wipes out some of the market fatigue seen in the latter part of the year.

Until then, those are the conditions that prevail.  Some of the best deals of the year often come in the final months. The best strategy buyers and sellers can employ is to huddle with their Realtor®, who keeps their fingers on the pulse of the market, look at the options and act accordingly. We may be seeing some fatigue, but October's numbers show the market is not grinding to a halt.

  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 1,250 local Realtor® members and almost 100 affiliates.

 

 

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