One month into the third quarter and for some, it seems like real estate has turned upside down. New standards and regulations are in effect after the Aug. 17 deadline. Inflation has eased enough that the FED is now saying it’s time to reverse course on interest rates and there’s more inventory that we’ve seen in four years. 

If you need to review the new landscape as a buyer or agent, check out my column about it at https://bit.ly/4dXAEfo. Unfortunately, all the new rules changes have obscured some important market shifts that have the potential to shake up things in the third and fourth quarters. 

Last week’s average for a 30-year-fixed-rate mortgage dropped to its lowest point this year. And since FED Chairman Jerome Powell has said it’s time to soften the policy that has driven higher rates investors, politicians and the public is looking for some relief. The FED doesn’t set mortgage rates, but an interest rate cut will work its way into the mix. Although future reductions may not significantly drive rates to where some want, it will move the market and help take the edge off affordability. 

Local market watchers have and will continue to shift focus on the labor market and rents for housing market influencers. Rents, which continue increasing faster than inflation and local wages, are one of the biggest local inflation factors. One-bedroom apartments in some markets – like Kingsport – are now above $1,000 a month. 

Like the national labor market, the local job creation situation is softening. The routine job gains/loss is also getting more attention. Last week JTEKT in Telford announced it will cease operations in 2025. The plant, which opened in 2006, employees 250 people. The week before a golf care manufacturing firm said it would add 200 jobs.  

Although fewer sales have tapped the brakes on the home price growth, it has also allowed an inventory runup. At month’s end, there were 2.9 months of inventory across the region. That’s the best it has been since 2020. Buyers who have been on the sidelines now have more choices and lower mortgage rates have helped their buying power. Those conditions stand a good chance of moving the sales and price market. 

Another factor that will affect the price growth rate is in the weeds of July’s Pending Sales Report. Pending sales are a leading indicator of housing activity based on signed contracts for existing single-family home and condominium sales in the region monitored by NETAR. Since resales go under contract 30 to 60 days before they close, pending sales offer insight into the market’s direction.     

NETAR’s Pending Sales Index has been flat since May. In July, it was even with July last year and 16 points higher that the 2018 annual benchmark. The items that will keep price growth alive – even without increases driven by lower mortgage rates and higher inventory – are the makeup of pending sales in the three markets. 

The affordable market has the largest share of sales, but it’s flat at last year’s level. 

The more-up market – homes in the $250K-$499,999K price range – are 7% higher than last year.  

Pending sales in the luxury market – $500K and up – are 22% higher than last year.  

July’s regional median price was $279,000, up 3.3% from last year. The seven-month price trend is up by 5.9%. 

Ten of the 21 local submarkets had a median price higher than the region last month. The most expensive market was Piney Flats with a $462,200 median price, followed by Mount Carmel with a $419,500 median price. The most affordable homes were in Mooresburg, Bristol, VA, and Surgoinsville.