The first half of 2022 has been a mixed bag for housing. Much of it had more to do with consumer confusion and lack of confidence fed by pundits harping on bubbles and crash theories that what was happening. There was some short-term local sales volatility while price growth remained on an unrelenting double-digit increase path. And all the while, new listings and active inventory was making small gains.
Here’s how Northeast Tennessee Association of Realtors (NETAR) Rick Chantry summed it up in NETAR’s June Home Sales Report. “Almost all six-month trend metrics are down from last year, but the local market continues struggling with more demand than supply. Higher mortgage rates have tapped the brakes on loans, and there are more homes on the market, but it continues to be a competitive marketplace. Prices also continue outpacing wages, so affordability is taking a hit.” Chantry thinks the market will probably see more of the slowing trend after deals from the peak home buying and selling season are closed. The full report can be found by CLICKING HERE
The 500-lb gorilla question about the last half of the year is where will prices go?
At the mid-year point, typical sales prices in the Tri-Cities region and in all but two of the 15 city and community submarkets are up by double digits. The exceptions are Bristol, Va. It’s up 8% and Mountain City. It’s down 3.5%. That is more a reflection of that market adjusting to some high-end sales during the first half of last year than a price softening.
Realtor.com recently upped its second-half price outlook to 6.6%. They’re not alone in that assessment. But getting local markets to that level would require some serious – and somewhat unlikely – price reductions. While both local metro markets are rated in an April CoreLogic analysis for Fortune as overvalued, follow-up studies said the odds of them seeing home prices decline over the next 12 months were very low.
That original analysis was based on income growth projections, unemployment forecasts, consumer confidence, debt-to-income ratios, affordability, mortgage rates, and inventory levels. Since the April analysis, the odds of a regional price decrease have risen with rapid changes in the economy.
According to CoreLogic, a housing market that is overvalued “doesn’t guarantee a price correction; however, it’s troublesome if home prices become too detached from underlying economic fundamentals. Home prices can’t outrun income growth forever.”
Currently, the Tri-Cities inventory outlook is improving. There are several major single-family, townhome, and multi-family developments underway or planned. And despite a labor shortage, the labor market continues to improve. So far this year, employers are adding an average of 420 nonfarm jobs a month. A concern is wages. The region has some of the lowest average private-sector wages in the state, and last year’s improvements show signs of softening.
At the end of June, median home prices above $200,000 in all but one submarket. That’s the same as the six-month trend. The median price growth rate has exceeded the average price growth rate for almost a year marking a continued structural price increase.
And since it looks like inventory won’t increase all that much during the last half of the year, prices will likely stay on their current track. That’s reinforced by a slight softening of mortgage rates.