Home affordability drops to 11 and 9-year lows in Sullivan and Washington counties

Housing affordability dropped to an 11-year low in Sullivan County and a nine-year low Washington County during the last quarter of 2018.  But even though homes were less affordable, Sullivan and Washington are still among five of the 13 Tennessee counties in Attom Data Solutions’ Q4 U.S. Housing Affordability Report where the average wage earner can afford to buy.

The affordability situation worsened in all the Tennessee counties during the last three months of 2018.

Nationwide, home affordability dropped to more than a 10-year low. The most current affordable index of 91 was down from the previous quarter and last year. Among the 469 counties analyzed in Attom’s report 357 (76%) had an index below 100. That means homes were less affordable than the long-term affordability averages the county. All Tennessee counties in the report had an index below 100.

The report calculates an affordability index based on a percentage of income needed to buy a median-priced home relative to historic averages, with an index above 100 indicating median home prices are more affordable than the historic average, and an index below 100 indicating median home prices are less affordable than the historic average. (See full methodology below.)

“While poor home affordability continues to cloud the U.S. housing market, there are silver linings in the local data as home price appreciation falls more in line with wage growth,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Affordability improved from the previous quarter in more than half of all local markets, and one in five local markets saw annual wage growth outpace annual home price appreciation, including high-priced areas such as San Diego, Brooklyn, and Seattle.”

That relationship between home price appreciation and wage growth was best in Sullivan County where home prices were not rising faster in wages. The opposite was true in Washington County for the quarter.

Average wage earners in both counties could qualify for a mortgage if they had a credit rating and debt to income situations that passed muster for lenders.

It took 20.2% of the median wage in Sullivan during Q4 to buy a median-priced home compared to the historic wage share of 17.2%.  The annual income needed to buy in Q4 was $34,495. That includes 3% down and 28% front-end debt to income. The median payment was $805.

In Washington County, the wages need to buy was 27.5% up from its historic share of 26.5%. The annual income – assuming 3% down and a 28% front-end debt ration – was $40,469. The median payment was $944.

Housing was most affordable in both counties during Q1 2013.  The previous least affordable index for Washington County was Q3 2007. For Sullivan County, it was Q2 2006.

Report Methodology

Attom’s Home Affordability Index analyzes median home prices derived from publicly recorded sales deed data collected by Attom and average wage data from the U.S. Bureau of Labor Statistics. The affordability is 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.

 

 

 

 

 

 

 

 

 

Johnson City sales tax collections led the region in Oct; Kingsport-Bristol continues strong market share position

The Johnson City metro area had the best retail sales collection performance in Northeast Tennessee in October. It was the third straight monthly year-over-year increase for the three-county Metropolitan Statistical District (MSA) which has underperformed its regional market share every month this year.

October’s seasonally adjusted Johnson City collections were also second to Nashville which led the state with a 5.2% increase. Statewide collections were up 3.6%.

Here’s how collections looked in NE Tenn:

Johnson City, up 3.4%

Kingsport-Bristol, up 2.6%

Knoxville, up 0.7%

Morristown, down 1.7%

Kingsport-Bristol continued to lead the region in year-to-date collections improvements compared to the first 10 months of last year. It also has the best record of collections performing above it 2017 market share position.

Clicking on the charts renders larger versions.

Statewide collections were down 2.7% from September. Each of the state’s 10 metro areas was also negative.

Here’s what those month-over-month numbers looked like in the four NE Tenn.  metro areas, according to MTSU’s Department of Economic and Finance and the Tennessee Advisory Commission on Intergovernmental Relations:

Johnson City, down 1.5%

Knoxville, down 4.3%

Morristown, down 8.4%

Kingsport-Bristol, down 10.4%.

Sales tax collections were in contrast to October’s Tri-Cities labor market performance.

Employers added 1,000 nonfarm jobs, the unemployment rate was 3.8% and the average hourly wage for private-sector workers was up in both the Johnson City and Kingsport-Bristol MSAs.

According to preliminary numbers from the Bureau of Labor Statistics (BLS) the average hourly private sector wage increased 0.5% to $18.32 in the Kingsport-Bristol area. It was the seventh month-over-month increase for that four-county area.

Private sectors workers in the Johnson City metro area increased by 1.9% to 20.31 – the best monthly increase since April.

 

Tri-Cities federal workers have highest avg. weekly wage of major labor market subgroups

Tri-Cities federal workers have the highest average weekly wage for major labor market subgroups. Those Bureau of Labor Statistics Quarterly Census of Employees and Wages subgroups include total workers covered, the private sector, federal, state and local government sectors.

The next best-paid group is state workers, and those in that group in the Johnson City Metropolitan Statistical Area (MSA) have seen the biggest year-over-year pay increase so far this year.

Wages for local government employees are closer to what private sector workers get.

The wage groups drill down illustrates why the region’s average private sector wage – typically the lowest in Tennessee – is not reflective of median household incomes. It’s also instructive of the composition of the local labor market.

October’s BLS preliminary, not seasonally adjusted count of nonfarm jobs showed a seven-county Tri-Cities total of almost 205,000. The private sector portion accounts for a little over 171,000 jobs. There are almost 20,000 government workers. The reason the private sector and government job totals don’t add up to the nonfarm total is non-profits and not-for-profits are not counted.

Here’s how the jobs breakdown for the three-county Johnson City MSA and four-county Kingsport-Bristol MSA looked in October. The government jobs are totals at the end of Q2 this year.

Clicking on image renders a larger file.

JOHNSON CITY MSA

Nonfarm – 81,500

Private sector – 64,500

Federal sector – 3,000

State sector – 6,500

Local government sector – 7,500

Clicking on image renders a larger file

KINGSPORT-BRISTOL MSA

Nonfarm – 123,600

Private sector – 106,800

Federal sector – 900

State sector  – 2,700

Local government sector – 13,200

The year-over-year wage gains for each of the groups also differ. Johnson City groups – with the exception of local government workers – had the largest increases in the region.

Job creations during the year pushed October’s nonfarm and private sector totals higher than last year’s annual totals for both metro areas.

The same holds for the Q2 totals for all three government worker groups in both Tri-Cities metro areas.

 

 

 

Perfect storm crimps Tri-Cities new home permits; builders say there’s still room for growth

The Tri-Cities new residential permits report was slammed by a perfect storm of bad consequences during Q3 and the first nine months of this year. Labor and material costs were up, new codes tacked some hefty increases on the average cost of a new home, interest rates increased, and wet weather made it a tough year for on-site construction.

Anyone of the conditions would have crimped new permit pulls, but higher interest rates, higher labor and material costs, new codes, higher gas prices, and a trade war combined to crimp new residential permit pulls.

But new home builders are having their second-best year for new home construction since 2008. Unfortunately, that good year is not resulting in an increased inventory of new homes during a period when homes for sale inventory is at record lows.

Area-wide new permits were down 15.9% compared to Q3 last year. The year-to-date tally is down 16.2%, according to The Market Edge’s Q3 building trends report. The report is recognized as the best building permit data resource in Eastern TN because it has representatives visit every local code office to gather data.

The report shows 280 new permits for the region in Q3 and 734 so far this year. The year-to-date total is 142 fewer than 2016, which was the best year for new permits since 2008.

Washington Co. TN saw the red ink in both the Q3 and year-to-date tabulations. So far this year it has seen 124 fewer new home permits than the first nine months of last year.

Carter Co. took the second biggest YTD hit, down 37 permits from last year followed by Sullivan Co. with a decrease of nine permits.

The permit picture for Greene Co. is much brighter. It has seen an increase 21 new permits so far this year. Washington Co. VA’s total is up four permits, and there was a YTD gain of one permit in Hawkins Co.

When higher labor and material costs, higher interest rates, new code requirements, a trade war and one of the wettest years on record all come at one time “it’s no wonder permits are down,” said Kelly Wolfe, Wolfe Development in Jonesborough. “And don’t overlook higher gas prices. That’s a huge factor on local consumer confidence.”  Another factor is it’s an elections year. Every time you have an election where the market sees the situation to be less than certain people use it as an excuse to put off making big-ticket decisions, he added.

But with all that said, Wolfe thinks there still room from new home growth in the Tri-Cities region.  And despite this year’s soft numbers consumer confidence and the existing home market bear out his assessment.

Sullivan Co. – the region’s second largest new home market – saw a drop in permits during the first nine months of the year, but the decrease was only 4%. Compare that to the 33.2% permit decline in region’s largest market – Washington Co. TN – and the decline doesn’t look so bad. The resale market for Sullivan tells a similar housing demand story. Sullivan has consistently claimed a larger market share of regional resales every month this when compared to its 2016 annual market share.

Much of that new home and resale result is a slow release of pent-up demand, a little better inventory than the other counties and a steadily improving economy.

Eric Kistner, Bridge Point Realty, thinks the new permit lag this year is the result of cyclical conditions and not a sign the market is declining. While the new home market – like the rest of the housing market – is expected to be softer in 2019, he also says there’s room for growth.  A new phase at Edinburgh and the Riverwatch development in West Kingsport are examples of the confidence some builders have in the local market.

Wolfe added that builders need to be paying more attention to prices.  “My wife is insistent that we find a way to bring the price point down,” he said. Things can’t keep going up the way they have been if the new home market is going to remain viable, he added.

Recovery of the local new home market has been slower than other housing market components. New permits are only at about half of the pre-recession levels during a time when demand has driven the inventory of existing home for sale to record low levels. Those inventory levels are particularly low in the $200,000 and below price range which historically accounts for more than 70% of all local home sales.

Here what the YTD new permits look like compared to the first nine months of last year.

Carter – 60, down 27

Greene – 113, up 21

Hawkins – 22, up 1

Sullivan – 215, down 9

Washington TN – 249, down 124

Scott VA – 59, down 8

Washington VA – 59, up 4

 

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