Despite 100% home loans and low mortgage rates, cash remains king for Northeast Tennessee-Tri-Cities home resales.
According to a recently released RealtyTrac analysis, almost half of Q2 sales in five of nine local county markets were cash. It’s not a fluke. The region constantly sees a share of cash sales that exceeds the national average, and the gap widened during Q2.
Nationwide cash buyers accounted for 27.5% of all single-family home and condo sales in Q2, down from 30.4% last year. It was also the lowest level of cash sales since Q4, 2007.
But in the Tri-Cities only one local market saw cash sales less than the national share. Washington Co. VA had a 25.3% share. At the same time, Johnson Co. had share that was double the national average.
Here’s how local counties fared compared to the Q2 2015 shares:
– Carter Co. 48.4%, up from 43.8%.
– Greene Co. 45.4%, up from 44.4%
– Hawkins Co. 45.2%, down from 46.5%
– Johnson Co. 55.2%, up from 45.7%
– Sullivan Co. 34.9%, down from 34.5%
– Unicoi Co. 45.8%, down from 46.3%
– Washington Co. TN 32.7%, up from 32.2%
– Bristol VA 38% up from 32.3%
Investors, both individuals and institutional, account for some of the all-cash sales, for inclusion in the rental inventory or flipping.
Flipping has increased in the region. Another RealtyTrac analysis shows their share of total sales remains in the single digits. Gross profits vary wildly from quarter to quarter but in two county markets with the highest number of flipped sales the Sullivan Co. median gross return on investment was 58.1% while it was 65.2% in Washington Co.
Cash buyers traditionally snap up the market’s offering in the $200,000 and below price ranges, which accounts for a little more than 70% of all regional single-family sales. Increased activity in that market tier and the fact that resales in the higher-price homes are struggling has held the local average median sales prices in the lower single digits so far this year.
Resales have been closing at a record pace since June last year, according to the Northeast Tennessee Association of Realtor’s Trends Report. But new listings have not kept pace with sales so the inventory has been squeezed.
July’s Trends Report said the regional inventory was 23% lower than last year and new listings lagged last year by 5%. The number of months it would have taken to exhaust the active inventory at July’s sales rate was 4.9 months. The rule of thumb for normal market conditions is six months, but the local norm is more like seven to 10 months inventory.
That supply-demand dynamic means a correction is on the horizon and will come when buyers back off to wait for more inventory to come online. However, according to NETAR reports, that correction won’t come in the short-term because new pending sales are still strong as pent-up demand continues to burn through inventory.