Here’s a housing market conundrum for you?

Statistically, Sullivan and Washington counties are affordable housing markets. There’s no question about that. The folks at Attom Data Solutions crunch the numbers each quarter and the outcome is home prices are increasing faster than wages, but the average wage earner has the buying power to purchase a median-priced home. That’s an accurate analysis. But it’s a silver lining to a dark cloud.

When you look at the income and apply the assumptions of a 3% down payment, an acceptable debt to income ratio needed to buy an affordable home then check the inventory of listings at or below the targeted median sales price the conundrum kicks in. Less than a third of the listing in either county is in the affordable range by those metrics. Drilling down a little deeper and looking at wages and household incomes throw more shade on it.

That’s a housing affordability problem. It’s also an economic development headwind because most of the jobs being created are in the $30,000 and below. It’s an issue because to get the desired homeownership rate v. renter rate you have to look current wage trends. What’s the big deal about ownership? They’re more involved in the community and if housing is affordable, they have more disposable income to spend on retail and services.  It’s called workforce housing and it’s a prime target for Opportunity Zones. At least that was the intent when they were plugged into law.

Attom’s Q3 Home Price Index (HPI) shows Sullivan County’s housing is less affordable than its historic average. Washington County’s HPI is a little better picture. That county’s housing was more affordable than its historic average. But both are in the affordable market range.

Attom’s HPI analysis involves a data cluster to gauge affordability. The core is quarterly median home sales prices and wages. It also assumes a 3% down payment and a 28% front-end debt-to-income ratio. The bottom line is an annual income of $33,140 in Sullivan County and $38,414 in Washington County is needed to buy a median-priced home. That’s doable for the average worker in both counties based on annualized income.

But if you get into the weeds the picture is a little muddier. The income to qualify aligns with a little more than 40% of Washington County and 39% of Sullivan County households based on the most current Census household income data.

Another income issue is the class of workers. If you look at the broad picture income looks pretty good. But if you drill down to private v. government wage averages another issue pops up. About 78% of Washington County and 81% of Sullivan workers are in the private sector and our region has some of the lowest average private-sector wages in Tennessee.

The reason the total wage picture looks better is government workers in Washington and Sullivan counties enjoy a higher average wage than private-sector workers. That lifts the total wage picture. But it’s a distorted picture. For instance, in 2018 the annual average weekly wage for a federal worker in Washington Co. was 41% higher than the average wage for a private-sector worker, according to the Quarterly Census of Employment and Wages. The variance for state and local workers is not as great. The average for state workers is higher than the average for local government workers, which are only a little better than private-sector averages.

And then there’s the inventory issue.

Six months of inventory is what real estate professionals use to signify normal market conditions. That’s not what you have in either county, especially when you look at listings in the affordable range. The price range where normal market conditions currently exist is in the $200,000 to $399,999 price tier, while the affordable homes are in the $200,000 and below price tier.

Sullivan Co. currently has 2.8 months of inventory of homes for sale. That’s all listings, according to Realtor Property Resource (RPR) It’s been that way all year, so far. When you drill down to homes, townhomes, manufactured homes that are in or below Sullivan’s affordable median sales price benchmark by Attom’s analysis there’re 254 listing – 30% of that county’s total inventory.

Washington Co. currently has 2.3 months of inventory. It has been tighter than Sullivan all year. The drill down to Washington County’s affordable benchmark yields 191 homes, townhomes and manufactured home listings – 29% of the county’s total inventory.

That’s why Realtors say accessibility is a bigger challenge than affordability in the local housing market.

Here’s a couple of additional factoids gleaned from Attom’s Q3 HPI report.

The median Sullivan Co. mortgage payment was $773. That’s 1% less than it was a year ago, but 3% higher than the Q2 number. Year-over-year median home prices are up 8% while the annualized wage growth rate is 3%. The percentage of annualized wages need to buy an affordable home is 19%.

The median Washington Co. mortgage payment was $896 – 6% more than it was last year and down 5% from Q2. The year-over-year median home price increase is 16%, while annualized wage growth is 4%. The percentage of annualized wages needed to buy is 25.4%.

The average property tax in Sullivan was 0.4% or the monthly mortgage. It was 0.5% in Washington Co.

Categories: REAL ESTATE