By DON FENLEY
TRI-CITIES, Tenn. – One of the most watched items in today’s housing market is how much sales are declining. Mass media headliners make it sound like it’s a big number, and it is in the markets they’re watching. But the decline is more subtle here in the Tri-Cities.
During the 12 months ending in mid-August, sales have softened less than 1% from the previous 12-month period – 677 sales over 12 months is only eight fewer sales per week. The softening from when the market peaked 12 months ago is 3.7%, according to donfenley.com. That’s a little over 329 sales or about 27 sales a month. It’s a long way from the major metro areas decline.
The market share of sales in the previous dominant price range of under $200,000 is also down almost 12% (1,148 sales).
Sales in the higher price ranges so far this year are:
– $200,000 to $299,999, up 2.5%
– $300,000 – $399,999, up 3.5%
– $400,000 – $499,999, up 2.2%
– $500,000 – $599,999, up 1.6%
Another sign of softening demand is the number of days homes spend on the market before selling. It increased in every price range from the 12 months ending in mid-August last year. That’s less demand, but it doesn’t mean the region will quickly have balanced market conditions of 5 to 6 months of inventory. You have to go to the higher-end price ranges before that begins showing up.
It also begs the question of how long will it take to get back to normal and what will that new normal be?
At the current rate, balanced inventory conditions in the mid-price ranges should begin showing up late next year. Balanced conditions in the most affordable price range will take longer since most new homes being built are above that price range, and existing home prices are still increasing. The sweet spot also continues inching up.
Sales in the $200,000 and below range accounted for 42% of sales during the 12 months ending this month. Several years ago, that price range’s market share was a whopping 75%. Sales in the $200,00 to $400,000 price range accounted for an equal market share of 42% in August.
Commercial Real Estate firms like the TCI Group-Jerry Petzoldt Agency, Johnson City, and others in the Tri-Cities closely track the long-range residential housing trends because they are prime population and demographic trend indicators.
While the region’s overall net population growth is still a little anemic, there are hot spots. For example, Jonesborough has the region’s best Census estimated growth rate (2.8%), followed by Bristol, TN (1.3%), then Johnson City (1%). Two counties – Johnson and Hawkins – have a higher estimated population growth rate than the state, and Washington, TN, paces the state rate of 0.9%.
And since the region’s population growth comes from new residents, there are some early indicators of how that churn affects median household incomes and education levels. Early Census data show median household incomes are gaining in the $100,000 and above household income ranges. Some – but not all – of that growth is organic. Education levels are also increasing. That’s important. Some retailers like higher education levels since that demographic tend to be more brand loyal.
A quiet and unreported movement trend is newcomers relocating to the region who start new businesses or bring their business skills with them. And we can’t overlook those coming here with the tech skills to work anywhere. The net result is economy building by creating more job opportunities, commercial real estate activity, and economic growth.
It will be several months before another study with more defined demographic numbers is available. In the meantime, trend watchers can stay tuned in with this monthly update as it expands on housing to commercial real estate and building the economy by focusing on who’s looking at us and what they see.