By DON FENLEY
GRAY, Tenn. – Later this week, we’ll get our first look at NETAR’s Home Sales Report, which shows how the housing market is reacting to the fall season, higher mortgage rates, an increasingly volatile stock market, and the experts’ revision of where things are heading.
There’s no doubt it’s a season of change, and more than leaves are turning, according to the Northeast Tennessee Association of Realtors (NETAR).
Lawrence Yun, NAR’s chief economist, told interviewers last week that he expects the annual median home price to rise by only 1.2%. He also expects the current interest rate environment and weaker economic activity will see existing home sales decline 12.2% by year’s end. Looking forward to next year, he thinks home sales will pick up in the second half of 2023 but will be down by 7.1% overall.
It’s important to remember that Yun is talking about U.S. housing sales and prices. He is not recognized as one of the top 10 economists in the nation for making bogus claims. But the hyper-local effect of real estate often means a different set of numbers for local markets.
For example, at the end of August, the typical local median home sales price was at an all-time high. The eight-month trend was almost 20% higher than the first eight months of last year. Even if the local prices dramatically reversed, it’s hard to imagine the annual appreciation dropping from 20% to the low single digits. Sales are a different issue. Last month they were down 18% from last year. Still, there’s context to consider. Last year was the hottest sales market real estate officials can remember. To get a better read, compare this year’s sales to 2019 before the effects of the pandemic turned the market upside down. August sales exceeded the August 2019 total by two.
The takeaway is that today’s slowing sales are even with what the market did before the pandemic.
There’s no doubt that the housing market is undergoing change. So far, the local changes haven’t been very close to what’s happening in the major metro markets. That doesn’t mean some trend reversing changes are out of the question during the last four months of the year. And experts think the market will be friendlier to buyers in the coming year.
What about those who would like to buy but are stuck renting as either mortgage rates or home prices makes buying a home unaffordable right now? Expects also expect rent growth to continue over the next 12 months. That’s balanced in the local market by some pushback on some investor owners’ uber-high rent expectations. Locally, rents in some of the newer developments range from $750 to $850 for one-bedroom apartments instead of $1,000 a month. There’s also additional competition from new build-to-rent townhome developments targeting apartment dwellers who don’t want someone living above or below them and a little outdoor space that isn’t common.
Top housing experts demand to remain soft for an extended period if mortgage rates remain high. They also think that would crimp some new home construction. Barak Saltzman, vice president of D.R. Horton city operations in East Tennessee, says his firm has adjusted its efforts according to market conditions. He said the company’s market needs outlook for the NE Tennessee is between 3,500 to 5,000 new homes, and he plans to fill most of that need.
The best advice for local real estate professionals and consumers is to focus on the local. Those are the only conditions that matter.
The two primary sources for local housing market information are NETAR’s website at www.netar.us and CordData at www.donfenley.com . NETAR’s Home Sales Report will go public later this week. The following week the Commercial Real Estate Market Report will be ready. Toward the middle of the month, the all-import forward-looking pending sales report will be released on the NETAR website. And early every week, the Market Pulse reports will segment a separate part of September’s reports for a closer examination. CoreData reports are made as data, and new information becomes available.