The housing boom has pushed the local market to new highs. But it’s not an equal-opportunity boom. Sales at the top end of the market have made a significant market share increase. At the same time availability of affordable homes has tightened, shutting some out of the market.
Existing homes sold for over $600,000 surged 167% in the 12 months ending on July 9. The 251 sales accounted for 3% of all homes sold during that 12-month period. And 46 of them went for a minimum of $1 million, according to an analysis by the TCI Group, Jerry Petzoldt Agency. The study focuses on the region’s four metro areas. It includes data by price ranges and includes months of inventory for each price range. Sales comparisons are for the 12-month period ending on July 9 to sales during the same 12-month period last year.
Most of the market share increase has come in the $200,000 to $400,000 price range. They have risen from 20% of all sales to 36%. A similar trend exists in the new home market. Existing-home sales in the $200,000 and below price range account for a little over half of all sales, but their market share has declined from 75% to 53%.
Fuel for the rapid rise in prices was the boost in purchasing power provided by basement level mortgage rates and savings buyers who didn’t lose their jobs during the pandemic accumulated. Low inventory and rapidly rising prices also helped push more higher-end homes on the market.
There were 150 homes priced at $600,000 and above in early July. Forty-five of them had a $1 million or more asking price. Demand in the $700,000 to $900,000 range was at the traditional inventory mark for balanced market conditions – five to six months of inventory. Demand was higher in the $600,000 to $700,000 range and a little above balanced conditions in the $800,000 and up range.
Demand – as measured by months of inventory – in Bristol TN/VA leads the rest of the region in all the most expensive homes price ranges with one exception. The Johnson City market has a slight edge in the $1 million-plus priced homes.
Demand for pricier properties will eventually fall back over the next few years as local buyers gradually spend down their savings and mortgage rates increase. The question mark is how long the influx of out-of-state residents will who have taken advantage of the local market’s value position on high-end properties last. Some of that advantage has eroded with a sales pace that has absorbed close to 300 of those properties during the first half of this year.
The Tri-Cities growth rate of new high-end home permits has led the East Tennessee region for the past year; almost all of it is for custom, not spec homes.
There are no signs that the housing boom is running out of gas. But there are signs of buyer fatigue and push back from overheated pricing. An example comes from a buyer who asked not to be identified. He and his wife had their eyes on a property they saw about a year ago. It was listed at $900,000. It recently came back on the market at $1.2 million. The buyer said there were no upgrades or improvements, just a $300,000 higher asking price. “I think I’ll wait until the market settles down,” he said.
That’s what a growing number of housing economists are advising buyers to do. They say while owners are saying it’s an excellent time to sell, buyers should think now is a good time to think about pushing the pause button.
That’s not a prediction the local market will swoon anytime soon. Prospective buyers will face low supply and high prices for at least another year. The experts say price growth should begin cooling in 2022, making the market a little more buyer-friendly. That will likely affect the lower end of the market. Still, it will also blunt the splurge on expensive homes as their value position erodes. However, the upper market will still be attractive to out-of-towners who are leaving markets where homes are more expensive. The same goes for local buyers who can buy but think the high-end market is too overheated.
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Categories: REAL ESTATE