It’s never been more expensive to buy a Tri-Cities home

Tri-Cities home sales were up 13% for the 12-months ending on Aug. 11. That’s a point better than the 12 months ending in July. At the same time, the 12-month sales data trend shows that although existing home sales in the $200,000 and below price range still dominate the market, higher price homes are making strong gains.

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Even the region’s new price point sweet spot – $200,000-$399,999 – was in the shade to the $400,000-$599,999 price range’s 43% growth rate. And there were two outliers with bigger numbers.

The Johnson City Region’s $800,000 to $1 million-plus price range sales were up 138%. And the Twin Cities Region’s resales in the $600,000-$799,999 price range were 180% higher.

A market-share sidebar is the August data continues to point to a softening of the Johnson City Region’s market. While that area has a solid hold as the market with the highest average resale prices that average is skewed by high-end sales. In the two core market areas, Johnson City’s market share is underperforming all the other areas except Greeneville.

The higher prices trend is good for the region’s economy and sellers. But it also says, it’s never been more expensive to buy a home as it is now. An extension of that reality is the housing market is booming for some consumers – but not everyone.

Here’s what resales by the region, and the four major city market regions looked like for the 12 months ending on Aug. 11 compared to those ending the 12-months ending in mid-July.

TRI-CITIES      

$200,000 and below – up 7%

$200,000-$399,999 – up 23%

$400,000-$599,999 – up 43%

$600,000-$799,999 – up 32%

$800,000-$ 1 million plus – up 13%.

TOTAL RESALES – up 12.7%

TWIN-CITIES  

$200,000 and below – up 13%

$200,000-$399,999 – up 10%

$400,000-$599,999 – up 58%

$600,000-$799,999 – up 180%

$800,000-$ 1 million plus – down 43%

TOTAL RESALES – up 14%

GREENEVILLE REGION           

$200,000 and below – up 13%

$200,000-$399,999 – up 46%

$400,000-$599,999 – up 94%

$600,000-$799,999 – down 33%

$800,000-$ 1 million plus – down 50%

TOTAL RESALES – up 11%

JOHNSON CITY REGION        

$200,000 and below – up 0.5%

$200,000-$399,999 – up 18%

$400,000-$599,999 – up 32%

$600,000-$799,999 – up 15%

$800,000-$ 1 million plus – up 138%.

TOTAL RESALES _ up 10%

KINGSPORT REGION 

$200,000 and below – up 4%

$200,000-$399,999 – up 34%

$400,000-$599,999 – up 37%

$600,000-$799,999 – up 68%

$800,000-$1 million plus – down 40%.

TOTAL RESALES – up 16.3%

The hanging question is, can the Tri-Cities economy sustain the current housing market performance?

Local fundamentals are strong, but you can’t sell what you don’t have, and sooner or later, pent-up demand wanes.

The local new home industry has added about 1,000 homes a year for the past four years. At mid-year, new home permits were 12% better than the first half of 2019. That’s essentially more slow-growth.

There’s a rule of thumb in the housing industry that says every six existing home sales create one new home construction. The local market hasn’t lived up to that benchmark since the pre-Great Recession days. Between 2015 – that’s when resales took off – and 2019, the region’s new home builders added a little more than 4,800 units – almost 800 homes short of what a balanced market would have added.

Sooner or later, the local market will cool because much of it is being driven by pent-up demand and hyper low mortgage rates.

The local job creation rate – traditionally a primary driver of housing demand – is lackluster. The labor market has been seriously damaged by COVID-19, and that damage came just when it looked like the jobs market was about to recover from the Great Recession.

Population growth – another primary demand driver – continues to be stagnant.

New residents moving to the area has and continues to sustain a minor net population growth rate. But don’t read too much into the stories about a mass migration of city folks to submarkets. It’s happening, but the submarkets the media is talking about is metro areas like Knoxville and Chattanooga. That doesn’t mean the Tri-Cities isn’t getting some of the work-anywhere migration. But we’re in the rural area reception point of that trend.

To sustain the current level (2015-2019) of resales, the local market needs an average of a little more than 7,000 sales a year. To sustain a 2013-2019 level would require an average of about 6,000 sales a year. At the end of July the total was 4,246. That 2.4% fewer than the first seven months of last year.

The Tri-Cities current existing-home sales annualized is pointing to an annual increase of about 5%. That will likely increase with a record month in August and a strong fall season. The 2019 annual increase was 6.5%. The two years before that were in the 4% plus ranges.

The current trend shows the hot market bounce from the COVID-19 two-month sales slump is the sharp “V” shaped recovery predicted. That should continue unless there’s another major COVID-19 shock.

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Categories: REAL ESTATE

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