November’s Tri-Cities area housing market in context
Tracking today’s housing market is like trying to take a drink from a fire hydrant. There’s a geyser of information. And putting context to all that data can be as much an art as a science. We’ve all seen the headlines and social media reports that say prices are tanking, inventory is exploding, and homes are lingering on the market. Look closely at those reports. They never specifically say – and back it up with data – those are the Tri-Cities conditions. They may be accurate descriptions of some markets, but most are woefully unsupported exaggerations of local conditions.
Each month, the Northeast Tennessee Association of Realtors® (NETAR) offers a Housing Market Report that is purely local information. In recent months, the market has become more complex because it’s transitioning from highs local real estate professionals have never experienced to something that will eventually look more like a typical market with balanced conditions.
Here’s a rundown of some of November’s primary data and what it means to local buyers and sellers.
Sales have declined for five straight months. They’re down almost 30% from last year. They’re down because mortgage rates have doubled. That caused a spike in mortgage payments. Rates were pushed higher as part of the FED’s inflation-fighting efforts. Experts say housing accounts for about a third of what drives inflation. So, if you want to curb inflation, step on housing.
But while sales are down from last year’s record levels, they are performing at or just below what they were doing before the pandemic hit and dumped a ton of crazy on the market. In other words, sales are normalizing.
Tri-Cities home values have made some major gains in the last five years. Their growth rate trended lower for the last three months. The median sales price – the middle of the market – has dropped from $245,000 to $225,000. That’s $15,000 more than it was this time last year and $73,000 more than it was the year before the pandemic. The 11-month price trend is on track for an annual increase in the range of 15%. It was 17.6% last year, 11.1% the year before, 7.4% in 2019, and 5.5% in 2018. Before that, the region’s average price annual appreciation rate was 2.3%.
The local economy’s and consumers’ health will determine where home prices go next year. Depending on which expert analysis you use, the odds are that prices will be pretty close to where they are now to a modest increase.
National Association of Realtors (NAR) Chief Economist Lawrence Yun’s U.S. outlook is for a 1% price increase next year. The local market has performed at or above the national rate for the past three years.
How many homes are on the market has a lot to do with what prices do. Fewer homes for sale typically mean higher prices. More properties on the market gives buyers more leverage. So far, the local inventory is still squeaky tight. In November, the region had 1.8 months of inventory. That’s how long it would take to sell everything on the market at the current sales pace. The last time the region has balanced conditions was in 2018 when there were a little more than 5 months of inventory. We’ve got a long way to go before we’re back to balanced conditions.
TIME ON MARKET
A prime demand indicator is how long a home is on the market before selling. That has been increasing for four months, so demand is slowing. But it’s happening at a snail’s pace. In November, the median days on the market were 49. That’s up from the low point of 42 days in April. So, homes are spending more time on the market. But they’re selling faster than last year when the median days on the market was 54.
Another forward-looking indicator is NETAR’s pending sales report. It will be available at mid-month. An early look points to buyers accepting fewer contracts in November than they have any month this year. That aligns with closings and what you would expect in a transitioning market and a typical Autumn market.
The local market is cooling down. A headline that says sales are tanking gets more eyeballs, but it’s not a contextual description of what’s happening. The price growth rate is slowing, but prices are not crashing. Homes are spending more time on the market. But they’re selling faster than last year. Inventory is increasing but at a painfully slow pace.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us