Tri-Cities housing market trudges toward new norm

April’s housing reports point to a Tri-Cities area housing market on the cusp of taking a hiatus from its break-neck pace. It’s unlikely to be the bust some predict, but it’s also not likely to be significant short-term relief for those who worry about affordability.

April’s existing home sales were down 2.2% from March, down 6.5% from April last year, and down 3.3% from the first four months of last year. Last month’s median existing-home sales price of $220,000 was down $5,815 (3.5%) from March but 13.7% higher than April last year. There were 790 closings as of May 4, but the total will increase as deals not processed in time for the early count are added.

Northeast Tennessee Association of Realtors (NETAR) President offered a backstory to April’s Housing Report this way. “Mortgage rates have spiked to their highest level in 13 years, and significant questions about the market’s direction give some consumers reason to pause. But even with the uncertainty over inflation, higher mortgage rates, lack of inventory, and higher fuel prices, consumer demand is strong. The market is on a steady footing despite higher rates. New household formations are up, homes are scarce, and even though builders are bringing new homes on the market at a record pace, it’s not keeping up with demand.”

Data source: NETAR Home Sales Report

April’s report comes on the heels of two noteworthy market analyses that included the region.

The first was from CoreLogic for Fortune magazine. It put housing markets into five categories based on the likelihood that home prices would fall during the next 12 months. Odds for falling prices in the Kingsport-Bristol and Johnson City areas ranked “very low,” or 0-to-10%.

The next was by Moody Analytics. It suggested that homes in Kingsport-Bristol were overvalued by 44% and 36% in the Johnson City metro area. Chief Economist Mark Zandi said he didn’t foresee a home price correction. However, he does think some of the nation’s most overpriced housing markets could see price declines up to 10% during the coming year.

Freddie Mac’s current outlook is for a 2.2% price decrease this quarter and another 1% per quarter into next year. National Association of Realtors (NAR) Chief Economist Lawrence Yun says price growth will “steadily decelerate where year-over-year annual price gains will look quite normal at 5% by the end of the year.”

The advantage the local market has as it trudges toward balanced conditions and a new normal is the surge of new residents is not letting up. The concern some have is the surge is driven by retirees instead of new jobs. With the exception of the Johnson City surge we have little data about the ages of new residents. But it’s a given that some belong in the retiree class. Attracting them is a necessity to replenish the population. The region’s outmigration, high death rate and low birth rate are a big population drain every year. But that’s not all the housing demand story. There’s ample pent-up demand driven by the coming of homeownership age of the Millennial and GenZ folks. Their biggest headwind is affordability.

Mortgage rate increases alone have upped the cost of buying a home by $300-to-$400 a month. Many Kingsport apartment dwellers are facing a similar issue. Rents for some Kingsport apartment dwellers’ lease renewals are up anywhere from $200 to almost $500 a month in some cases. The bottom line is housing affordability is becoming a bigger concern.

But despite the darker sides of the overall market, the situation is brighter in many of the region’s submarkets.

According to NETAR, home sales in Bristol, TN, Elizabethton, and Erwin are booming compared to this time last year. And the median price is up in all but three of the region’s 15 submarkets.

Categories: REAL ESTATE