By DON FENLEY
GRAY, Tenn. – We’re 10 months into the year and there is no doubt the local housing market has reached an inflection point. A slow transition to a less hectic, more balanced market is underway. But unless something really, really big and unexpected is hiding in the wings, don’t expect big price reductions. Property prices tend to move slowly. It took four years to evolve to today’s hectic market conditions. The road back may take just as long.
September’s median market price was $235,000, down from $245,000, where it parked in July and August. That’s not much buyer relief. And it’s almost 15% higher than this time last year. The long view is that it’s 56.7% higher than before the pandemic. In dollars and cents, the typical September sale was $85,000 more than it was in September 2019.
Our current typical price peaked at $250,000 in May and has been slowly softening, according to the Northeast Tennessee Association of Realtors(NETAR). So far this year, the median sales price has been increasing at a little better than 1.1 % per month, down from 1.8%. A safe expectation for the 2022 annual appreciation is still in the double-digit range. Last year’s annual increase was 17.6% %. The year before was 11.1 %.
Another sign change is underway is there were almost as many sales where the price was discounted as there were for above and at list price. There were fewer multiple offers, and buyers are not as prone to wave all contingencies as they were earlier this year. At the same time, the typical listing price increased by almost $10,000 in September to an all-time high. Maybe sellers are adding some padding in expectation of tougher negotiations with the opportunity buyers. Opportunity buyers rely on wealth rather than income for their purchases.
While these are signs that the market is becoming a little more buyer-friendly, others are being forced onto the sidelines by higher monthly mortgage rates. Since most local sales are made with less than a 20% down payment, buyers are paying private mortgage insurance that increases the monthly payment. That’s where affordability enters the picture.
The recommended level of spending on housing is 25% of a person’s or family’s income. Once it reaches 30%, they’re in what’s called a housing-stressed position. It’s noteworthy that over half of the Tri-Cities renters spend 30% or more of their income on housing. Some are spending 50 %.
The $20,000 question is how long will the transition take before the market reaches somewhat balanced conditions. That would require some pretty big short-term changes, and things like home prices tend to be slow movers. Balanced conditions are usually defined as five to six months of inventory. The Tri-Cities market hasn’t seen that since the first quarter of 2018.