The Tri-Cities is one of the local markets bucking the national foreclosure market trend. And entrepreneurs are taking advantage of it, repurposing of other buildings and new apartment construction to cash in on a housing market where demand has driven inventory to record lows.
ATTOM Data Solutions’ May Foreclosure Report shows U.S. foreclosure starts down 6% in May, but 43% of the local markets in the nation had increased. Combining county-level foreclosure data from analysis shows the Tri-Cities region had a 61.5% increase.
A total of 33,623 U.S. properties started the foreclosure process in May, down 6% from a year ago — the 35th consecutive month with a year-over-year decrease. Counter to the national trend, 23 states and the District of Columbia posted a year-over-year increase in foreclosure starts in May, including Texas (up 53%), California (up 3%), Georgia (up 15%); Pennsylvania (up 6%); and South Carolina (up 31%).
A drill down to the county level shows only two counties had declines in the number of new foreclosures last month compared to May last year. There were six fewer in Hawkins County and three fewer in Bristol, VA.
Kingsport had one of the largest increase in new foreclosures. The city is also a hotbed of both existing home sales and efforts to cash in on the hot market.
Foreclosures are attracting almost as much attention these days as they did during the early days of the housing market’s recovery from the recession. But much fewer of the foreclosures are going to first-time buyers. Flippers and investors are snapping them up and grousing about the increasing price increases they are having to pay compared to a couple of years ago when some foreclosures were selling half of the market rate.
The flipping market is stronger now due to the shortage of existing and new homes on the market.
The Northeast Tennessee Association of Realtors’ May Trends report put the regional inventory at a little over four months while it was much tighter in all of the local city markets. May was also the single best month for single-family resales in 10 years.
A localization of ATTOM’s Q1 Flipping Report said, “Record low inventories of homes for sale and new home construction that is lagging demand has upped the interest in home flipping in the Tri-Cities region. And the fact that flippers are seeing a lower gross return on investment (ROI) than they did last year but are still doing better than the national average this year doesn’t hurt.” The report also found that must of the flips was being sold in the $200,000 and below price range, which typically accounts for three of every four existing home sales in the region.
Of course, not all of the flips are in the lower price range. There’s also quite a bit of activity in the $250,000 to $300,000 price range in some city neighborhoods.
The homes across the street from the Town Park Lofts are hot for investors since the complex with its retail space is considered a linchpin to the next phase of Kingsport downtown development. Rapid construction on the 263-unit luxury apartment complex – once known as Supermarket Row – has kept many locals marveling at the pace.
Meanwhile, the competition to keep occupancy rates up is picking up. The Valcap Group, property managers for Brandy Mill, Allandale Falls, Crosscreek and the Landings picked up over 80 residents during the first weeks of a $1 Summer Move In campaign. The battle to attract and retain residents to keep occupancy rates high has been compared to a game of musical chairs.
The housing inventory shortage also moved investors to snap up what developments are left of those abandoned during the recession and other properties to demolishing use for new homes and townhomes. The most current example is the demolition of the old Dickson Elementary School for a project that is being called Cherokee Bend.
Kingsport Alderman Joe Begley is one of the principals in the property’s redevelopment. According to a Times-News report on the project, the development will “probably have 25 to 30 units – some single-family houses, duplexes and perhaps eight townhomes.” The price range was reported at $175,000 to $200,000. Begley told the newspaper, “you’ll probably see houses come up there first, ideally by early fall.”