Local housing data show demand is beginning to slip. That coincides with a sales decline from August when closings were 13 shy of the all-time record. While the median sales price is growing, it has been flat for four months. And brokers say they are seeing fewer multiple offer deals. That’s especially true of deals at the higher-end of the market, according to Town and County Realty’s broker/owner, Jewel McKinney. Century 21 Legacy’s Karen Randolph agrees. She says her firm still sees multiple offers deals, “just not as many of them.”

The data is pretty clear: The sizzle is coming off the market. But don’t mistake it as a signal for a sharp correction. Depending on how you read the data, it’s still a robust sellers’ market even though, on a monthly basis, the market is definitely cooling

Home sales are entering a seasonal slowing pattern consistent with four of the past five years. The exception was last year’s pandemic-driven market. Data source NETAR Home Sales Reports. Clicking on the image renders a larger version.

Northeast Tennessee Association of Realtors (NETAR) Kristi Bailey sums it up this way in NETAR’s September Home Sales Report, “The market is taking a breather. It’s growing, but the growth rate is slowing from last year’s torrid pace.”

September’s 850 closings were down almost 12 percent from last year. It’s something locals are not used to hearing. But that’s comparing the region’s all-time high sales month to a month this year that’s down but still the second-best September in the past five years when the region’s hot market first took off.

September’s average sales price was $250,187. That’s 15.7 percent ($33,866) better than last year. At the same time, it was down $6,960 from August’s average. The median sales price – the middle of the market – was $205,000, up 14.5 percent ($26,000) from last year and down $5,000 from August.

Other signs that market conditions are moderating include:

• The time on market before closing has inched up from 47 days in May to 50 days in September. The longer homes stay on the market is a primary demand indicator. If it increases, demand is softer. If it declines, demand is rising.
• New listings have outnumbered new pending sales for the past four months. That allows a slow, steady increase in active inventory. Since bottoming out in January, the number of area homes for sale has increased 7.5%.
• Since April, active inventory has increased from a 1.3-month supply to a 1.7-month supply in September. That far from the five- or six-months inventory than marks balanced market conditions.

So why isn’t this a correction?

The median existing home sales price has increased but it has been flat for the past four months. Clicking on the chart renders a larger image. Data source NETAR Home Sales Reports.

There have been small data changes in the month-over-month numbers, but the year-to-date trend data isn’t pointing to a short-term correction.

So far this year, sales are 13.7 percent greater than the first nine months of last year. And the median sales price is 16.7 percent better than the first nine months of last year.

When September’s sales and price data is annualized, it points to year-end increases in the range of 10% for sales and 19% for prices.

As predicted, the local market has entered a period of seasonal slowing. It conforms to the patterns for four of the past five years. The exception is last year’s abnormal pandemic market. And if the housing economy is truly beginning to normalize, inventory will continue slowly building for next year’s prime buying and selling season.  Mortgage rates are expected to increase. That should blunt the extra buying power from the pandemic-ear basement-level rates.

There is no argument that the local market cannot sustain last year’s pandemic-driven run. It was unstainable, especially in a region that struggles to sustain its population status quo and one where the labor market isn’t producing abundant high-paying jobs. There’s also no doubt that as the market stabilizes, it will settle to a new normal. But unless there’s some dramatic sales and price shifts that replace the trend data that stabilization will be a gradual process playing out over a year to two years instead of a sharp market correction.

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Categories: REAL ESTATE