The Tri-Cities area housing market is beginning to move from sizzling to just hot when you look at much of the data. But when the Wall Street Journal and Realtor.com rank the two local metro areas in the top 50 emerging markets for the investment and a nice place to it warrants a harder look.
The Northeast Tennessee Association of Realtors (NETAR) July Home Sales report showed the local market outperformed the national numbers. Good news, even though it received much less attention from local media.
July’s local home sales were 7.8% better than in June and up 3.1% from July last year. During the same period, U.S. sales rose 2% amid higher inventories. The same condition existed with the local inventory. Active inventory has been slowly increasing for a couple of months. But it hasn’t been enough to take a big bite out of the months of inventory situation. Last month the region had 1.6 months of inventory of homes for sale on the market. By mid-August, it had climbed to a 1.7 months’ supply. Nina Heffner’s drill-down chart on months of inventory by local submarket and price range affords a more detailed look at the supply/demand situation.
Emerging Market Index
Although the regional market shows signs of a traditional seasonal slowing, it’s still a top market for investment and livability, according to the Wall Street Journal/Realtor.com Emerging Housing Market Index. It ranked Johnson City 8th in the nation. Most media listed only the top 10 emerging markets in their reporting on the index. But if look at the top 50, Kingsport-Bristol is ranked 39th in the nation. They are also the only two Tennessee housing markets in the top 50.
Why was the Johnson City metro market ranked higher than Kingsport-Bristol when it has posted stronger growth? The reason is the index is weighted between the housing markets and the local economies.
The Journal and Realtor.com developed the index to help buyers decide on the best places to make their housing investments. “The rank identified housing markets that are expected to prove both a strong return on investment – and are a nice place to live.”
The Nashville metro area was ranked 62 even its has attracted the lion’s share of recent growth.
Affordability pinch
Realtor.com also used the index data in a report on the 10 hot spots where locals are least likely to be able to afford a home. Carter Co. had the dubious distinction of being No. 8 on that list.
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The story said, “a flood of buyers from other parts of the state as well as the rest of the country has caused home prices to skyrocket. And because there are few homes on the market, buyers are willing to pay up and get more space. Those coming from larger cities aren’t batting an eyelash at prices that may be out of reach for many locals.”
The story cited the truism that home prices have dramatically exceeded local wage increases. That the case in all the local markets. But sometimes the data doesn’t tell the whole story.
Average list prices in Elizabethton are up by double digits, and so is both the average and median sales price for the first seven months of this year. But over half of the sales (67%), so far this year (67%) have been at or below the median sales price. More sales of homes in the $500,000 and up range have skewed the reported prices higher. That’s also true in all the local markets.
During the 12 months ending in mid-August, 53% of all the homes sold in the Tri-Cities region were in the $200,000 and below price range. That’s down dramatically from a couple of years when the $200,000 and below market share was over 75% of all sales. However, an influx of new residents plus a year’s worth of basement-level mortgage rates have moved the sales sweet spot to the $200,000 to $400,000 price range. Those record-low mortgage rates gave local consumers more spending power. Many used it to buy more expensive homes than they purchased when rates were nearer their traditional norms.
Ali Wolf, chief economist at the real estate research firm Zonda, attributed to the migration of residents to smaller metro and some rural areas to their ability to work from home. In Realtor.com’s story, she was quoted saying, “The jury is still out on what this means long term. Ultimately, though, some locals will bet hurt as rising home prices, and rents strain their budgets.”
That’s true, but the other side of the story of the rising prices is it has pushed the share of local owners with seriously underwater mortgages to record lows, according to an ATTOM Data Solutions analysis. At the same time, the number of equity-rich properties also saw a sizeable market share increase.
Housing markets that are in transition tend to be more confusing and evoke more conflicting predictions. That’s why sellers, buyers, and investors should consume as much local market information as possible to put some context to what they read and hear about the national market conditions.
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I’m so glad you realtors are jazzed about us having our housing costs increased by 100% over the past three years. It’s great that your income has increased at the same rate. Unfortunately, the rest of us haven’t been so lucky.
I’m not a realtor, and my income has not increased due to the housing market increases.