Almost 13% of Tri-Cities home sales are co-buyer purchases

There was a time when a married couple was the dominant demographic for home buying. But not anymore. Singles – especially single women –  and unmarried couples have joined the ranks of homeowners as co-buyers. There are also increasing numbers of co-buyers who are family who want to help but also want some of the home’s future equity.

ATTOM Data Solution’s Q1 U.S. Residential Property Loan Origination Report points out co-buyers are bringing some of the highest down payments to settlement. Nationwide the average is $56,911. That’s 46% higher than the average down payment. But that’s not quite the same thing that happens on the local market. The market share of single-family co-buyer sales is not as high here. Neither is the purchase price or the down payment.

There were 177 area co-buyer sales during the first three months of this year. Of that total 89 were in the three-county Johnson City Metropolitan Statistical Area (MSA) and 88 were in the four-county Kingsport-Bristol MSA.

Nationwide 17.5% of all single-family sales were co-buyers. Locally the share was 12.5% in the Johnson City MSA and 10.3% in Kingsport-Bristol. There wasn’t much difference in the other Northeast Tennessee MSA. Knoxville led the region with an 11.9% share of co-buyers while Morristown had a 5.8% share.

The average down payment in the Johnson City MSA was $12,764 – 8.1% of the $156,897 average purchase price. Both were smaller in Kingsport-Bristol. The average down payment was $10,509 – 7.4% of the $142,333 average purchase price.

“Homeownership rates are still hovering around historic lows — even though lenders continue to offer more low-down payment options,” said Michael Micheletti in the ATTOM’s report. He’s director of corporate communications at Unison, a company that provides down payment assistance to homebuyers in exchange for a share of any future increase in the home’s value. “Letting people borrow more doesn’t make buying a home more accessible or affordable. It’s not surprising that in places like Seattle, the Bay Area, and other challenging markets buyers are looking at ways to increase their purchasing power and reduce the amount of debt they are taking on. The sharing, co-buying, and co-owning of a home movement will only grow as more Millennials and Gen Z enter the marketplace.”

While the local market has a different set of dynamics buyers looking to increase purchasing power and cultural trends exert similar if not stronger impacts here.  That increased buying power can be seen by comparing the average sales price for co-buyers with other buyers. In the Johnson City MSA, it was $11,085 higher. In Kingsport-Bristol it was $8,452 higher.

What wasn’t higher was the average percentage of the co-buyer purchase? It was 8.1% compared to 9.6% for other buyers in the Johnson City MSA. In Kingsport-Bristol co-buyer had an average 7.4% down payment while it was 9.5% for other buyers.

One that real estate professionals are beginning to see more often is unmarried couples buyer a home.

Sixteen percent of first-time buyers last year were unmarried couples, according to the National Association of Realtors. That’s a good economic move for couples in a committed relationship in an area like ours where it’s still cheaper to buy than rent. But it also comes hand-in-hand with additional risks.

One thing an unmarried couple should do before first is sit down with an attorney and create a co-ownership contract. Discuss and finalize things like what happens to the property if you split up, or if one person dies or become disabled, who pays for major repairs and the utility. Look at it as a prenup for the property

Hawkins, Carter wages led area’s 2017 increases; home prices grew faster than wages in most counties

Most workers saw a wage increase that was better than last year’s inflation rate.

Hawkins and Carter counties had the largest annual increase in average total sector wages in the Tri-Cities region last year.  Workers in Scott County scored the largest increase in the area’ three Southwest Virginia counties.

The Bureau of Labor Statistics (BLS) released its Quarterly Census of Employment and Wages earlier this month and although the totals are preliminary they show most workers got a bump in pay last year that was above the 2.1% inflation rate. Washington County and Bristol Virginia are the exceptions. Since the numbers are preliminary, they are subject to revisions when the report for Q1 2018 is released later this year.

Last year’s annual average total sector wage compared to change from 2016.

The wage data offers another look at last year’s key economic indicators for some context on the overall recovery of the regional economy. Earlier this year six of 10 key indicators painted a picture of a growing 2017 Tri-Cities economy, but trend lines for all but three show a flattening or pronounced growth rate declines. At the same time, the four-county Kingsport-Bristol Metropolitan Area (MSA) trailed the three-county Johnson City MSA in all but one key indicator. Several primary reports haven’t been released yet. The Bureau of Economic Analysis’s (BEA) report on the region’s Gross Domestic Product is due in September and the analysis for local area personal income is due in November. The American Community Survey (ACS) 1-year study is scheduled for release in September and will be supplemented with data for areas of 20,000 population or less in October. The final piece in the 2017 story – the County Business Pattern – won’t be available until next year.

2017 annual total covered sector wage increases compared to the year-over-year increase in home resales.

Since the annual wage report is for total labor sectors covered it offers a broader look at wage performance than the monthly private sector weekly average. And since it’s available on the county level is offers a comparison of wages and average sales prices for single-family home resales. The housing market has been the strongest economic component in the region’s recovery from the Great Recession and it continues to outperform the other segments. Home prices grew faster than wages in all but four jurisdictions. That takes a bite out of local affordability, but it hasn’t pushed the overall affordability picture into the red yet. The region’s current biggest housing challenge is availability – not affordability since new home construction has lagged the recovery and the existing home market is seeing the tightest inventory most locals can remember.

On the metro level, the three-county Johnson City Metropolitan Statistical Area (MSA) had the highest annual wage increase – 3.7%. That boosted the MSA annual average to $40,040.

The four-county Kingsport-Bristol MSA had a higher annual average wage ($42,720) but it underperformed its neighbor to the south’s growth rate. Kingsport-Bristol’s annual increase was 2.8%. Weak performance in Washington County VA and a decrease in the Bristol VA negated Scott County’s strong annual showing.

While the average wage offers a good representation of how salaries are distributed over the region the upcoming ACS and BEA reports will offer more specific data on household income ranges. It will also have the best listing of average and median incomes for individuals and households.

Tri-Cities sees more home flips, profits down – still above national norm

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 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.

ATTOM Data Solutions’ Q1 House Flipping Report shows there were there were more flips in most local counties included in the report than during the first three months of last year. Sullivan County is the fewer sales exception while Washington County is the exception where flippers are averaging more gross ROI.

The report lists 103 flip sales in the four NE Tennessee counties included in the report. Here’s how they ranked:

  • Washington – 35
  • Sullivan – 31
  • Greene – 24
  • Hawkins – 13

This year’s sales were an increase in the percentage of total home sales in every county except Sullivan, which led county markets in the number of existing home sales closings during the first four months of the year.  Sullivan and Kingsport are also the only local markets where their market share of closings is higher than their 2017 annual benchmarks. A breakdown of that data can be found at the Northeast Tennessee Association of Realtors (NETAR) Web Site’s Hot Markets Page https://netar.us/hot-markets

Nationwide the average gross flipping profit was $69,500 which translated into a 48.8% ROI. Each local county – except Sullivan – had a higher percent ROI than the national average and Sullivan, with 44.5%, wasn’t far off the pace. The percent ROI is higher than the national average because local purchase prices were lower.

“The 2018 housing market is a double-edged sword for home flippers,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Rapidly rising home prices boosted by a low available inventory of homes for sale or for rent are padding profits at the back-end when flippers sell, but those same market realities are eroding flipping returns at the front end by forcing flippers to pay more to acquire homes to flip.”

Local flippers face the same problems. Lumber and other building materials have and continue to increase in price, and the region’s labor shortage has upped the overhead. And they’re facing the same lack of inventory buyers face, so it’s harder to find a home to flip. And since the market has absorbed the excess inventory foreclosures that used to sell for deep discounts and were a mainstay for flippers have seen steep price increases.

But there are things working in their favor.

The first is an inventory that’s tighter than many local real estate professionals have ever seen. In April most, the large county markets had less than four months inventory and the large city markets – Kingsport and Johnson City – had barely more than two months inventory. New home builders are working full steam to keep up with demand, but there’s as much a shortage of new homes as existing home.

And since the most of the region existing homes (59%) are more than 20 years old, there’s an increasing interest among both consumers and civic leaders in seeing more flips since it adds to inventory. The flipping trend is also welcomed by affordable housing advocates since half of the flips during Q1 are firmly in the affordability range. On the other end of the spectrum, some of the flips are in the $300,000 price range. Government officials like the trend because it increases the property tax volume, which many of them think has not kept pace with the recovery of the housing market.

According to ATTOM, “Homes flipped in Q1 2018 that were originally purchased with financing by the home flipper represented 35.7% of all homes flipped during the quarter, up from 35.3% in the previous quarter and up from 33.5% a year ago to the highest level since Q3 2008 — a nine and a half-year high.”

The average time to flip nationwide was 183 during the first three months of this year. Only Washington County had better performance in that metric among the local counties in the Q1 study.

METHODOLOGY

ATTOM Data Solutions analyzed sales deed data for this report. A single-family home or condo flip was any arm’s-length transaction that occurred in the quarter where a previous arm’s-length transaction on the same property had occurred within the last 12 months. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of the property’s after repair value). Gross flipping return on investment was calculated by dividing the gross flipping profit by the first sale (purchase) price.

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Kingsport-Bristol continues strong sales tax collections; rental market competition heats up

April was a good sales tax collections month for Northeast Tennessee metros areas everywhere except Morristown.

For the third straight month, Kingsport-Bristol led the region in the year-over-year metric. It also outperformed April’s state increase and was second to Clarksville for the state’s best performance. And it leads the region on the year-to-date performance compared to the first four months of last year.

With the exception of January, Kingsport-Bristol has outshined the rest of the region in the seasonally adjusted collections reported by Tennessee Advisory Commission on Intergovernmental Relations and Middle Tennessee State University. February’s spike in collections put the four-county MSA on the high road and although the year-to-date collections performance has been waning it still is a little better than double the region’s performance.

The four-county Metropolitan Statistical Area’s (MSA) had a 14% market share of all collections in the four-county region in April, which is 0.14% its 2017 annual market share.

Year-to-date seasonally adjusted sales tax collections vs. the same period last year.

The Knoxville MSA claims the largest share of sales tax collection (64.3%) followed by Kingsport-Bristol (14%) then Johnson City (13.4%) and finally Morristown (7.3%).

Neither of the Tri-Cities metro areas has been able to recover the sales tax collection regional market share they had at the beginning of the decade. The Johnson City high point was a 13.81%. It was 14.34% for Kingsport-Bristol.

Here’s how the region’s April collections looked like compared to April last year.

Kingsport-Bristol, up 5.1%

Knoxville, up 3.8%

Johnson City, up 2.1%

Morristown, down 4.8%

Statewide collections were up 4.3%, and Clarksville had the best April year-over-year performance, up 10.1%.

On the Tri-Cities level, April was the best performance the three-county Johnson City MSA has seen since December 2017. Its market share of the seven-county region’s total collections increased to 49%, the best it has been since October last year.

Consumer sales saw a moderate April increase as rising gasoline prices took a bite out of discretionary spending

Excluding automobiles, gasoline, building material and food services, U.S. retail sales were 0.4% better than April last year.

Rising gasoline prices is one of the primary headwinds facing the local economy as the region enters the summer market.

So far, the effects of higher building material costs and record-low have not slowed the housing market pace, but the existing home sales growth rate is slowing. Although builders continue scrambling to keep with new home demand new home permit growth has not measured up to its 17% growth estimate. And while employers continue to add jobs and unemployment rates are at record lows, wages in the region have not proportionally increased with other segments of the economy.

One bright spot that is beginning to emerge is competition in the apartment rental rent competition – especially in Kingsport. After a lot of pressure from owners to increase rents, the owner of the Model City’s four major complexes launched an aggressive $1 first-month move-in marketing campaign to up their occupancy levels and compete with the newer complexes that have recently come online.

 

 

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