The Tri-Cities area housing market lurched into 2022 with a record-low inventory and sales that looked a lot like they did in the final months of 2021. During the 12 months ending on Jan. 10, sales were up about 10% from the previous 12-month period. A sign of the time is a few days after the data was pulled mortgage rates were bumped to almost 3.5%.
This year’s 12-month sales comparison shows the Johnson City region continued its market share domination, with one exception and in one price range. Kingsport had more market share of $100,000 sales. The regional total sales pattern also saw a familiar pattern. Sales of homes in the $200,000 to $299,999 price range were up 6% and accounted for one in five of all resales. Sales in the $300,000 to $399,999 price range were 4% higher and accounted for 9% of all sales. Growth in the $400,000 to $499,999 range was 2% higher than the previous period and accounted for 2% percent of resales.
According to the Northeast Tennessee Association of Realtors (NETAR) Home Sales Report, the region’s annual 2021 median sales price was $197,500. That’s expected to continue slowly increasing despite higher mortgage rates.
Mortgage rates have increased for three straight weeks to an average of 3.45%. That’s the highest average in three years. A real estate rule of thumb is moving rates – up or down – always stimulate sales. The lingering question is: will today’s unruly market behave as it has in the past, and by how much?
Inflation and Federal Reserve actions are pushing rates higher. Last week, data from the Bureau of Labor Statistics showed prices rose at the fastest pace in four decades in December, increasing 7% year-over-year. Inflation is bad for mortgage rates because it erodes the value of bonds’ fixed payments.
A National Association of Realtors (NAR) research reaction to last week’s increase was, “if inflation continues growing at its current pace, rates will increase even faster.” NAR thinks inflation will ease in the second half of the year and grow to 4.5% by the end of the year.
That could be good news for buyers. If sales ebb it should allow some of the inventory now in the pipeline to come on the market. At the same time, it could nudge owners who were still waiting for a market peak to list their properties. But one of the biggest local challenges for owners who would like to sell is where would they live after the sale. They would be jumping into a tight market for both sales and rents.
During the 12 months ending on Jan. 10 the share of homes in the $200,000 and below price range have declined from 76% five years ago to 53%. During the past 18 months, the price increase pace has also put pressure on the affordability of homes. At year’s end, Sullivan County’s affordability index had been below its historical average for 15 quarters. Although Washington Co. is a more expensive market than Sullivan, its housing affordability index has consistently outperformed Sullivan. However, its index has been on a less affordable arch for the past three quarters.
Home sales in the $1 million and up price range continued increasing during the current 12-month period. There were 64 sales during the last 12 months and 52 of these high-end homes on the market. Although those luxury sales accounted for only 1% of the sales the listings are 4% of everything on the local Multiple Listing Service. Sales in this price range have also skewed the region’s average sales price considerably higher than the median price.
The region had less than two months’ inventory at mid-month. Five to six months inventory is the benchmark for balanced market conditions. The Tri-Cities region has not had balanced conditions since the early months of 2018. Currently, the only local market balanced conditions is Greeneville in the $500,000 – $599,999 price range. Area-wide it shifts to the $900,000 to $999,999 price range.
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