Odds are home price increase rate will slow but not decline 

Rick Chantry 

For five years, local home prices have been increasing faster than our historical average. It has been and still is a great time to be a homeowner, even though there’s a lot of uncertainty about the housing market’s direction. But unlike sharp declines in the stocks and bonds markets, local home prices have stood fast against economic uncertainty. For example, stocks were down 13.5% for the first four months of this year. During the same period, the median sales price of homes here in NE Tenn. and SW Va. was up 7.5%.  

2022 NETAR President and Association Spokesperson

Yes, April’s median sales price was down from the previous month. The decline was 0.7%. That’s peanuts when compared to a one-day 1,000-point drop in the Dow. That’s noteworthy because, despite all the media attention about stock market gyrations, that’s not where most people have their wealth. In fact, the stock market is not reflective of the overall economy. But that’s another story.  

Most of John Q. Public’s wealth is rooted in their homes. And that homeowner wealth – as measured by equity – has seen a big increase in this overheated market. For example, during the fourth quarter of last year, 43.1% of all the local mortgaged properties were equity rich. That means the amount owners owed was no more than half of the property’s value. The local equity-rich share was slightly higher than the national average. 

Chalk it up as the boom time for real estate. The fact that the market’s pace was unstainable was not a big secret. We’ve written about it in this space several timed. Sharp mortgage rate increases, inflation, a persistent lack of inventory, and uncertainty driven by the Russian invasion of Ukraine have ganged up to slow the momentum.  

Slow is the watchword to remember. 

A recent Washington Post article cited Freddie Mac’s home price prediction and then balanced it with comments from the National Association of Realtors® (NAR) Chief Economist, Lawrence Yun. Comparing the local market’s performance to Yun’s national outlook shows the two are in close alignment.  

Freddie Mac thinks prices will fall to 2.2% this quarter and then continue to fall to 1% a quarter next year. Yun says, “Price growth will steadily decelerate where year-over-year annual price gains will look quite normal at 5% by the end of the year. The local annual average appreciation for the last 21 years is 3.8%. If you toss out the previous two years’ double-digit price increases, it comes out as 2.7%. 

A Moody Analytics study suggests that homes in the Kingsport-Bristol metro are overvalued by 44% and 36% in the Johnson City metro area. At the same time, a CoreLogic analysis of 400 metro areas for Fortune magazine rated the odds of Tri-Cities home prices dropping over the coming year as “very low.”

There are still many moving parts to the dynamics of the economy and housing market, so no one should be surprised to see some variations from historical patterns and the learned outlook of experts like Dr. Yun. Still, it’s a pretty good bet.  

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