Q1 housing market, what happened, what’s next?
Jan Stapleton - 2023 NETAR President
First quarter home sales and prices told a familiar story for the NE TN-SW VA housing market. Prices were up by double digits and sales were down by double digits. Digging into the quarterly reports does offer insights beyond the monthly reports into a market where there’s a lot going on, but not a lot of understanding about what it means.
First quarter sales were down by 495 from last year. Much of that can be blamed on higher mortgage rates pushing many first-time buyers out of the market.
Actually, there are three housing markets. The affordability market, the move-up market, and the luxury market. Their performance says a lot about the overall market.
The affordability market is home to work-force housing, flippers, and first-time buyers willing to go the fixer-upper route. It accounted for 605 sales during the first quarter.
The move-up market is the media focus because it’s where the action is. During the first three months of this year, it accounted for 790 sales.
The luxury market is the smallest in the number of sales and home to those buyers who are living large. During the first quarter, it accounted for 159 sales.
During the first quarter closings in the affordable market were down 33 percent from last year. The move-up market was down 13.6 percent, and the luxury market was down 11.3 percent.
They’re all down because it’s a comparison of today’s moderating market to last year’s all-time record high market.
Looking past the comparison, the sales pattern and volume trends mirror what the region experienced during the two years before the pandemic. And those years were strong housing market years for our area.
Another helpful market segmentation to track what’s happening instead of what has happened is comparing this year’s new listings to last year.
So far this year, affordability market new listings are running 20 percent below last year. Competition is ramping up with more multiple offers. There are also some reports of competitive bidding.
The move-up market’s new listings are up 11.6 percent. Listings in the $300K to $399,999 are driving the action. They’re 52 percent higher than this time last year.
Luxury market new listings are up 38.4 percent. Since it’s the smallest market segment, it presents higher – or lower – percentages as listing ebb and flow. During the first quarter, there were 73 more properties, with a price tag of $500,000 and higher. The total was 263. Of those, 92 were for $1 million or more.
Demand is increasing, so expect the housing market to pick up during the coming months as it typically does during the peak home buying and selling season.
“Mortgage rates are the lifeblood that drive home sales,” according to National Association of Realtors® (NAR) Chief Economist Lawrence Yun. And they have been dropping.
The push and pull dynamic are sellers will see gains but won’t get last year’s prices from buyers who can’t – or are unwilling – to overpay from a home.
Key economic indicators to watch are inflation and the labor market. Inflation may be declining, but it remains at higher levels than the Federal Reserve’s 2 percent target. So far, the labor market has remained strong despite short-term rate hikes. Pundits are predicting it will soften and that wages will also begin to decline.
There’s no sign that interest in the local markets – both locally or from afar – will let up through the prime home buying and selling season.
Realtor.com currently ranks Kingsport-Bristol as the 16th hottest of 300 U.S. metro housing markets. The outlook is it’s heating compared to last year.
The Johnson City metro area is ranked as the 26th hottest U.S. market. It’s outlook is “staying hot.”
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