By DON FENLEY
GRAY, Tenn. – Area pending home sales declined for the sixth straight month in October. While that’s a sure sign that the FED’s effort to slow the housing market to reduce inflation is working putting the slowdown in context is another matter. A strong case can be made that the market is resetting to what it was before the pandemic injected the crazy into it.
According to the Northeast Tennessee Association of Realtors (NETAR), sellers accepted 683 new contracts, down 116 from September and 272 fewer than September last year, for a 28.4% decline.
Pending sales are a leading indicator of housing activity based on signed contracts for existing single-family homes and condominium sales in the region monitored by NETAR. Since resales go under contract 30 to 60 days before they close, accepted contracts offer insight into home sales’ direction.
“Last month’s pending sales were at the same performance level as they were in 2018,” NETAR President Rick Chantry said. “There’s no question that we’re still in a seller’s market, but higher mortgage rates have tapped the brakes on sales growth and flattened prices.” And increasing numbers of sellers have reduced their asking prices to lock in contracts. This looks and feels like a more traditional seasonal market, he added.
At mid-month, the region had 1,367 properties on the market – 17 more than the previous month. That’s a key point because it’s unlikely that prices will move until there’s more inventory to make things more competitive. At the end of October, the area had a 1.7-month inventory of homes on the market for sale, unchanged from September. That’s the time it would take to sell everything on the market at the current sales pace. “Inventory has increased at a snail’s pace,” Chantry said. “We have had less than two months of inventory for 23 months, and the last time we had balanced market conditions was the first quarter of 2018.”
The typical home sold in August was on the market for 48 days before it closed. That’s up one day from September and the eighth monthly increase this year. However, it is still three days less than it was this time last year. Time on the market is a demand indicator. When it increases, demand is softening. When it declines, demand is rising.
Typically, sales slow during the holiday season and inventory is flat. After that, things begin to change as sellers start their marketing strategies for the spring peak buying and season.
The status of local loan originations also affirms the market is slowing from its pandemic-induced pace. Total local loan originations during the third quarter dropped to almost the same level as in the first quarter of 2000. That was just before the pandemic hit. Home purchase loans were on the same track during the third quarter. The big changes are in the number of refi loans. They’re down because mortgage rates have doubled in the past year. And HELOCs have increased as homeowners take advantage of the substantial equity gains during the last two years.
The current outlook for 2023 is similar to what the region has experienced since April. The 2024 outlook is for a more robust market.
Categories: REAL ESTATE
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