Slower spring housing market looks like a given
Jan Stapleton - 2023 NETAR President
January’s pending sales were up from December. New listings and active inventory are also up. All welcome signs that the housing market is shaking off its winter doldrums. Another welcome sign for those who worry population growth has become too hot is it looks like the prime home selling and buying season will be slow despite softer prices and slightly more favorable mortgage rates.
While active inventory is making some gains, it’s likely than many would-be sellers are going to sit tight for a while. One sign of that is the median asking price for existing home and condo resales continues to increase. Many owners are reluctant to give up their current low mortgage rates. About 90% of local homeowners have locked in rates below 5%. That’s a very good deal compared to the current average mortgage rate.
And some of those who are positioned for a move are having second thoughts about whether they should hang onto that home with the low mortgage rate as a rental for some passive income. The spring market is not only still a sellers’ market, it’s one where many sellers have a lot of built up equity and the ability to explore some options.
Buyers who are entering the market are in a better position than they were during the first half of last year when there was still a buying frenzy that sparked multiple offers and bidding wars. The dip in mortgage rates since the 7.08% peak will save buyers a couple of hundred dollars a month this year – If they put down 20%. So far that hasn’t been the average. Locally downpayments are less than half of that and the biggest challenge lenders are having is poor credit scores.
Another bit of good news for buyers is builders are sweetening offers for customers. And even though sellers continue upping their asking price, about half of the current sales are being discounted.
But with that said, prices and mortgage rates are still too high to fire-up demand to a restoration point.
Two big factors that will affect this year’s price season are domestic migration patterns and affordability.
Many first-time buyers – both those who are local and those who would like to move here – are still priced out of the market. There are homes in the affordable price range, but accessibility is as big an issue as affordability. The best new listing gains have so far been in the $300,000 to $400,000 price range. That’s also the best active inventory area improvement area. That’s understandable. It’s the sweet spot that seems to be attracting many of the new residents.
There are multiple outlooks that predict fewer moves this year than during the past couple of years. Historically, high inflation and concerns about the economy cause people to hunker down instead of moving. The counter to that is the same outlooks call for more long-distance moves as folks seek to improve their housing options and better jobs.
Compared to the price of homes in other areas, the higher local prices are still a bargain.
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