Analysis: Buying a home more affordable than renting in both Sullivan and Washington counties

There’s a lot of news about how rising home prices are torpedoing today’s buyers. While that’s certainly the case in some markets, it’s not what an analysis of Sullivan and Washington counties shows.

Attom Data Solutions Q1 Home Affordability Index data gives buying a more affordable position than renting in both counties. And Sullivan County scored a more affordable position for both renters and buyers.

The rent/buy position in the analysis comes from a comparison of the rent trends for 3-bedroom units, wages, median home prices and the percent of wages it takes for both renting and buying.

The primary factors driving the local buy positions include decreasing rents, increasing wages and slow home price appreciation.

The bottom line is it took 18.5% of the average wage in Sullivan County to buy a median-priced home. It Washington County it took 25.1%.

The share of income to rent was a little closer. In Sullivan renting required 25.4% of a person average while it consumed 28.1% in Washington County.

Attom’s data show 2017 3-bedroom fair market rents in Sullivan declined 3% to $913. They were down 1.6% to $917 in Washington County.

On the positive side, both counties are seeing wages increase faster than rents. The picture for home prices vs. wages was mixed. The analysis says wages were increasing faster than home prices in Sullivan, but not in Washington County.

From the national perspective, “Home affordability continued to worsen in the first quarter, not surprising given the continued strong growth in home prices combined with the recent rise in mortgage rates,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012 when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”

A noteworthy affordability contrast in the report is it took more than 43% of average wages need to buy a home in 97 of the 379 counties studies. And in five counties it required 100%.   Buying in Sullivan Co. required 18.5%, and it took 25.1% of the average wage to buy in Washington.

Attom’s report analyzed median home prices derived from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics. The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate mortgage and a 3 percent down payment, including property taxes, home insurance, and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments. Only counties with sufficient home price and wage data quarterly back to Q1 2005 were used in the analysis.

 

 

 

Tri-Cities rents show new signs of softening, area remains attractive for rental investments

Although several Tri-Cities markets showed new signs of a softening rental market, a new analysis shows most local markets remain attractive for rental properties.

Three of the major cities in the Tri-Cities region are almost at the 50% renter level and a fourth – Kingsport – is on track to catch up.

While there are several trends driving the increase in renters the big one – economics – saw local investors or landlords take a hit in yields. But those hits to the bottom line are more of an indication of a rental market that is softening due to increased inventory than other issues. An analysis from Attom Data Solution’s Q1 Single Family Rental Market report shows that while five of the nine zip codes tracked in the report had gross yield decrease from 2016, all but one – 37615 in Johnson City – was still at or above the national average yield of 9.3%.

Rents for three-bedroom units increased in five of the markets tracked in the report.

Unfortunately, Sullivan County was not included in the Q1 report. Daren Blomquist, senior vice president at Attom, said the reason was data from the region’s largest county – and the one that is undergoing the largest increase in multi-family projects – was not available.

“We only included counties with a population of at least 100,000 and sufficient rental and home sales data. Sullivan County, the largest county in the Kingsport-Bristol metro, was the only county in the metro area with more than 100,000 people; however, it did not make the cut because we hadn’t gotten in sufficient home sales data yet for this year to reliably calculate a median home price. Typically, we would have sufficient data for a county that size at this point, but it appears that for some reason the data is coming in a bit slower, which can happen for a variety of reasons when collecting public record data,” he explained.

Hopefully, that situation will be resolved for the Q2 report.

According to the Q1 report, the average annual gross rental yield (annualized gross rent income divided by the median purchase price of single family homes) among the 375 counties was 9.0%, down from an average of 9.1% in 2016.

“While good returns on single family rentals are hard to come by in high-priced coastal markets and in some other housing hot spots such Nashville, solid returns on single family rentals will continue to be available in many parts of the Southeast, Rust Belt and Midwest for investors purchasing in 2017,”  Blomquist said. “And single family rentals should continue to yield strong returns in many parts of the country going forward given the market undercurrents of low rent-ready housing inventory and low homeownership rates. Average fair market rents increased in 2017 in 86 percent of the markets we analyzed even while average wage growth outpaced rent growth in 67 percent of markets — a recipe for sustainable growth in the rental market.”

Locally, fair market rents for three-bedroom units saw a small decline. One and two-bedroom rents were another matter. They increased in the Johnson City MSA and decreased in Kingsport-Bristol. A more detailed report on that issue can be found by CLICKING HERE.

According to a recent report by Forbes, renters may bet the upper hand in 2017. Even if the local multi-family projects that will be coming on line this year here in the Tri-Cities – the shift to more renters than owners in the major cities wouldn’t likely come until 2018.

The homeownership rate has fallen steadily for a decade as millions of foreclosures prompted more owners to rent. Renting likely will continue to rise through 2030, due to demographic trends like aging baby boomers who are opting to downsize to rentals, noted a 2015 report from the Urban Institute. Evidence of that is currently being seen here in the Tri-Cities.

Also, hampering the housing market in gaining the advantage: a shortage of homes for sale. That shortage is making it more difficult for renters to buy.

And many low-income families aren’t renting by their own choice, says Nela Richardson, chief economist at the real estate brokerage Redfin.

Here’s a capsule version of the data from the counties and zip codes in Q1 Attom report listed by 2017 annual gross yield and the change from 2016. (The 2017 median gross rental yield (annualized gross rent income divided by the median purchase price of single family homes) was 9%, down from an average of 9.1% in 2016.

  • 37643 – Carter Co, 10.6% down from 12.9%.
  • 37650 – Unicoi Co, 15.5%, up 12.1%.
  • 37681 – Washington Co. – 15%, down from 18.4%.
  • 37601 – Washington Co. – 9.6% up from 8.9%.
  • 37604 – Washington Co. – 9.3%, up from 7.4%.
  • 37615 – Washington Co. – 5.5%, down from 5.8%.
  • 37857 – Hawkins Co. – 12.5%, down from 15.4%.
  • 37645 – Hawkins Co. – 9.4%, unchanged from 2016.
  • 37642 – Hawkins Co. – 8.7%, down from 11.2%.

Here’s what the 2017 median 3-bedroom rent in those zip codes looked like compared to last year:

  • 37643 – Carter Co, $770, up from $750.
  • 37650 – Unicoi Co, $800, up from $780.
  • 37681 – Washington Co. – $770, up from $750.
  • 37601 – Washington Co. – $850, down from $865.
  • 37604 – Washington Co. – $870, down from $850.
  • 37615 – Washington Co. – $850, down from $865.
  • 37857 – Hawkins Co. – $830, down from $850.
  • 37645 – Hawkins Co. – $970, up from $930.
  • 37642 – Hawkins Co. – $830, down from $860.

The 2015 share of renters in city markets was:

  • Bristol VA – 44.8%.
  • Bristol, TN – 31.9%.
  • Elizabethton – 39%.
  • Greeneville – 48.1%.
  • Johnson City – 46.1%.
  • Kingsport- 36.8%.

 

 

Washington Co. TN and Hawkins Co. lead Tri-Cities 2016 population growth

A county-level drill down on Census Bureau current population change estimated adds some dimension and a surprise or two. Earlier this week I did a report on the Metropolitan Statistical Areas (MSA) 2015-2016 population changes that showed a continuation of a familiar trend line. Johnson City MSA is growing while Kingsport-Bristol is struggling.

CLICKING ON CHART RENDERS LARGER VERSION

Looking at the numbers on a county level shows Sullivan County held its own last year but just barely with a six-person gain. The surprise was Hawkins County was the MSA’s growth hot spot. It had a population gain of 120 people – the second-best growth in the seven-county Tri-Cities region.

The two Virginia counties in the four-county region put the brakes on a slow growth positive for the two Tennessee counties and sank the MSA into the population loss category. Washington County VA had an 80-person loss while Scott County took the region’s largest population loss, down 230.

Washington County Tennessee maintained its standing as the Tri-Cities’ population growth center with a gain of 1,083 people.  Carter County also added to the Johnson City MSA’s three-county population position. It registered a gain of 72 people. Gains in Washington and Carter counties was enough to make up for Unicoi County’s 101-person loss.

The bottom line for the seven-county region was a gain of 870 people.

It’s not the growth many would like to see, but it’s better than the population losses that many areas on the nation’s interior and rural areas are feeling. The principal driver for the shift is a simple fact that the population is not growth fast enough to replentish itself.  Baby Boomers are aging and although mortality rates have increased death rates are higher than birth rates in many areas – including the Tri-Cities. During the 2015-2016 Census tracking period there were 4,900 births in the Tri-Cities and 6,131 deaths. The population gain came from people moving to the area to work or retire.

Population growth and economic development are rapidly emerging as a unified concern for some local leaders. Sustaining and growing the population base took on a heightened focus when the state Legislature put the brakes on the forced annexation law that had been the principal growth tool for many cities.

CLICKING ON CHART RENDERS A LARGER VERSION

When that law was changed, it forced the focus to demographic issues that had been lurking in the background for years. More than a few local leaders had to come to terms with growth figures that they touted relied only on annexations and were a thing of the past.

Kingsport has the highest profile effort to grow its population. Mayor John Clark is on record saying the city’s goal is to grow its population by 500 people a year.

Other local cities have a new resident recruiting program that dovetails with state efforts.

What’s absent in the population growth arena is  the same thing that’s absent in economic development. The region’s cities and counties are basically operating as separate entities.

During the most recent Eastman Chemical Company, regional leaders breakfast CEO Mark Costa reaffirmed an economic development pitch from the company’s position. According to a Kingsport Times-News report, he told the audience, “We have to figure out how we continue to attract business to this area. That’s the challenge we all face collectively, right? So how do we put together compelling packages economically … is what we need to work on. When people come to Tennessee, it’s drawing a lot of business from other states. They have choices. They can come here, they can go to Nashville, Chattanooga, Memphis. So how do we make ourselves a more attractive destination? That’s a huge opportunity for us because we haven’t done as much of that as I think we can do.”

Costa emphasized the Tri-Cities have to work together in economic development.

“Any one city, frankly, doesn’t have the scale by itself to be compelling,” he observed. “As a region, I think we can be very compelling. We have to have a regional mentality about this. I have felt strongly about that since the time I came into this job.

“No matter where the plant goes, we all win. There’s a huge multiplier effect … for every job we create, we probably create about 10 jobs in small business and services that surround us … we need to pick up the pace.”

 

 

Kingsport-Bristol only NE Tenn. region showing 2016 population loss

The latest Census population data is out with good news for Northeast Tennessee Metropolitan Statistical Areas (MSAs) with one exception. Kingsport-Bristol posted a loss from 2015. It’s a small loss, but a continuation of a trend that Kingsport city officials are battling to reverse.

County population numbers are next on the bureau’s release list, then cities. Last year all Tri-Cities counties except Washington TN recorded population losses. When city data came out Johnson City had gains, Kingsport was flat, and the other cities lost population.

Knoxville and Johnson City showed the biggest 2016 gains. Here’s a snapshot of the 2016 total as of July 1, the change from 2015 and growth rate.

Knoxville MSA – 868,546, up 7,377, up 0.9%.

Johnson City MSA – 201,661, up 1,054, up 0.5%.

Morristown MSA – 117,320, up 618, up 0.5%.

Kingsport-Bristol MSA – 306,334, down 381, down 0.1%.

Since 2010 the Johnson City MSA’s population has grown by 2,906 people

During the same period, Kingsport-Bristol’s population has declined by 3,182 people.

All of the growth has come from new residents moving to the area since the death rate in the region is greater than the birth rate.

 

 

 

 

 

 

 

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