October’s area housing market in context
Jan Stapleton - 2023 NETAR President
Tracking today’s housing economy is like trying to drink from a fire hydrant. And putting context to the flood of data can be as much an art as a science. But now – more than ever before – locking in reliable sources and working with a professional Relator® is critical for buyers, sellers, investors, and businesspeople trying to keep their fingers on their community’s pulse.
The Northeast Tennessee Association of Realtors® (NETAR) is the primary source for local housing market information. Although some of it is under the public media radar, it’s important because the market has become more complex as it transitions from unsustainable highs to something that will eventually look more like a typical market with balanced conditions.
Here’s a rundown of some of October’s primary data gleaned from NETAR’s weekly and monthly market reports that are available at www.netar.us and the associations’ social media sites.
So far this year sales are running 15% behind last year. They peaked in June at the lowest monthly volume since 2000. The long-range trend has arched downward since Feb. 2022. Currently, year-to-date sales are slightly ahead of where there during the first 10 months of 2018.
Tri-Cities home prices have made some major gains since they bottomed out of the Great Recession and the pandemic. The median sales price is up 120% since the bottom of the recession. That means half of the homes sold last month went for $142,000 more than they did in 2012 and half sold for more.
Prices are 63% higher than they were the year before the pandemic. That has injected a huge amount of wealth for local homeowners. At the end of the third quarter 56% of outstanding local mortgages had equity-rich status. An equity-rich property is one where the combined estimated amount of loans on it are 50% or less of its estimated market value. It’s also noteworthy that almost half of all homes in the region are mortgage free.
The 10-month price trend for single-family existing homes is running 11% higher than it was this time last year. The condo/townhome price trend is up 20%. Median sales prices have been flat since they peaked in July, ranging from a high of $269,900 to a low of October’s $260,000. Remember, that’s the middle of the market. Since sales in the upper price ranges have seen the most growth in the last half of the year, that’s pulling the median price average higher.
The local economy’s and consumers’ health will determine where home prices close this year and go next year. Affordability and accessibility will likely present the strongest headwinds.
The number of homes on the market has a lot to do with what prices do. Fewer listings typically mean higher prices. More properties on the market give buyers more leverage. So far, the overall inventory remains is still squeaky tight. But it is slowly increasing. Some community and submarkets have enough inventory for a toehold on balanced conditions in specific price ranges.
At the end of October, the region had 2.5 months of inventory. That’s how long it would take to sell everything on the market at the current sales pace. About 1,800 more listings were needed for broad, balanced market conditions. The last time the region had balanced conditions was in 2018.
Demand for homes is hanging strong despite lack of inventory, higher prices, and mortgage rates. That’s coming from organic pent-up demand and the influx of new residents moving to the area. The time a property is on the market before selling has increased, by only a few days. Another softening market demand signal is sellers have reduced their asking prices to close about half of the monthly sales so far this year.
NETAR’s current pending sales report is up 1% from September and 6% higher than last year. Pending sales represent homes that have a signed purchase contract but have not closed. Accepted contracts typically close in a month to six weeks. That aligns with the closings trend and what you would expect in a transitioning market as it nears the last months of the year.
Home sales activity continues cooling down, and there is some slight downward pressure on prices. The price growth rate is slowing, but prices are not crashing. Homes are spending more time on the market and buyers are slowly gaining more negotiating power. 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 1,800+ 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