October 8, 2017

Tight inventory crimps local housing market, outlook better than U.S. predictions


Applying national housing market predictions to Northeast Tennessee is dicey at best. But there're a couple indicators worthy of closer comparison to put things in perspective. And just for the record, while some local indicators are similar to national conditions the outlook is a little brighter.

Economists predict that an uptick in housing starts will be the primary driver of sales in 2018 and moderate increases in mortgage rates will slow the run-up in home prices.

2017 NETAR President

At the same time, the National Association of Realtors® downgraded its overall forecast for this year. NAR Chief Economist Lawrence Yun says low levels of housing supply this summer drained all of the market's momentum. With little relief expected he expects the market has essentially stalled. That lines up with NAR's pending home sale report and index. Both declined in August. It was the fourth decrease in the past five months.

Fast-forward to the local scene.

New pending sales in the 11-county region monitored by the Northeast Tennessee Association of Realtors®' Trends Report show they were up 1.7% from August last year and 7.3% better than the first eight months of last year. While new contract signings have decreased from 770 in May to 722 in August, they have been better than last year for four straight months.

That doesn't mean our inventory problem is getting better. New listings have been doing an every other month up then down thing since April. Currently, there are a little over 3,000 active listings. That's 19% fewer than last year. Combined with a sales pace slightly better than last year gives us 4.76 months of inventory. That's less than half of the norm for our market.

Still, sales keep outpacing last year's record levels. Not by much. But they're increasing. At the same time, new home sales are picking up. At the half year point, new residential permits were 21% better than the first six months of last year.

Washington County dominates this new home construction and sales boom. Builders report conditions have gone from "OK to frantic" in the past couple months. In short, they're selling new homes faster than the can build them.

That's good news because more new home sales tend to boost resale prices and add to the inventory of existing homes for sale.

When you put all of those indicators together, they paint a slightly better picture than what's you read about in national news reports. Buyers and sellers in our area will have to contend with a bump in mortgage rates, and some of the conditions Yun and other economists are seeing on the national level. But we have an advantage. We don't have to factor in the effects of hurricanes to our micro view and outlook.

Barring some unforeseen dramatic change in the fourth quarter, the local sales should wrap up 2017 even with or just a little better than 2016, which was our best year since the recession and the first time the combined single-family and condo sales volume was over $1 billion.

Yes, the lack of inventory has crimped sales – especially in $200,000 and below price range. During the 12 months ending in August, there were 10 fewer sales of homes in the $200,000 and below range. But at the same time, there were 223 more sales in the $200,00 to $399,999 range and 42 more in the $400,000 to$599,999 range.

So, what does all of this mean for local buyers and sellers?

High demand and low supply point to a challenging housing market. It's a market where the expertise of a professional Realtor® is a critical factor. Whether you are buying or selling real estate, it is important to call a Realtor® first.  Realtors® have real insight into the market, what makes it move, and the nuances to consider before making this most important financial and lifestyle decision.

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