October 21, 2018

Seasonal home sales slowing doesn't weaken market's pulse


September home sales saw the expected seasonal swoon from August, but the local housing market is still in growth mode.

Aaron Taylor
2018 NETAR President

Let's look at a few numbers from the Northeast Tennessee Association of Realtors® Trends Report (NETAR) and Realtor® Property Resource® (RPR) for some context to the volatile month-over-month data:

  • September single-family resales were 15.6% better than September last year.
  • Year-to-date single-family resales were 10.2% better than the first nine months of last year.
  • The average sales price of $177,488 was $4,845 (2.8%) better than August last year.
  • New listings were 20% higher than September last year – the third straight month of double-digit increases.
  • The average listing price was 15% higher than September last year.
  • The average sales price was 96% of the average listing price for the third straight month.

Those key metrics don't line up with stories about a steep housing market decline that are grabbing headlines. Local pending sales are stable, and a study of seasonal closing from 2008 to 2017 show that a little over a fourth of the local annual closing come during the last three months of the year.

Another plus sign is the annualized sales and price. The 11-county region monitored by NETAR's Trends report had an annualized single-family sale growth rate of 9.7% in September. The annualized average sales price was up 6.1%. Of course, annualized numbers will change with each new monthly report but even with seasonal slowing the local market is on track for another record sales year in 2018.

The bottom line: Buyers and sellers should pay close attention to current local market conditions and take the scare stories with a grain of salt. The time-tested method to get local market information relevant to an individual real estate transaction is to partner with a local Realtor®.  They are the market pros who have their finger on the pulse of what's happening in the local market instead of processing top-down market information that doesn't reflect local conditions.

Currently, our market still favors sellers, but more sellers who think now is a good time to sell could work in buyers' favor.

But what about next year?

By the close of 2018 the local housing market will have seen three record-setting sales years. Given current conditions that pace is not sustainable. Conservative estimates are mortgage rates will be in the 5.5% range next year. That and even modest price increases will continue to nibble at affordability unless there's more high-quality jobs and wage growth. New home construction is slowing as labor and materials plus new regulations have bumped the average cost to build a new home by almost $15,000. At the same time the flipping market and a trend showing many buyers would rather remodel and upgrade than buy new has promise.

All the conditions that lend themselves to slowing the housing market are in place. How much is the hanging question? The history of the local housing market - barring a major economic event – is slow, conservative sales and price corrections.