By DON FENLEY
GRAY, Tenn. – The housing market slowdown the media has been trumpeting for months is here, according to the Northeast Tennessee Association of Realtors (NETAR). Tri-Cities home sales are down and tracking at a 2019 pre-pandemic level. All the signs point to decreasing consumer demand.
The only metric that hasn’t joined the party is prices. They’re stubbornly hovering at their 2022 high. And since inventory is still meager, they may stay that way for a while. There is also a chance for an increase. Here’s how:
Prices have held steady because active inventory remains low. The region’s inventory is currently 50% below the 2019 pre-pandemic benchmark. Mortgage rate increases have dampened consumer demand, and economic uncertainty is causing sellers to sit on the sidelines instead of putting their homes on the market. If – as expected – mortgage rates continue softening, it could create a slight demand surge that would put upward pressure on prices.
The primary forward-looking metric is pending sales. Since contracts are accepted anywhere from 45 to 60 days before the sale closes, pending sales are a window to next month’s numbers. The number of contracts sellers have accepted been on a downward trajectory since April. Compared to last year’s numbers, the decline is substantial – down 28.4%.
The time a property sits on the market before closing is also increasing. That’s a sure sign that consumer demand is waning.
This is where you should step back, take a deep breath, and put some context to this slowdown and how it stacks up.
Pending sales are back to pre-pandemic levels. They’re performing at a 2018 level, and 2018 was a strong market. But to have balanced conditions, active inventory would also have to return to pre-pandemic levels. So far, and that isn’t happening. In fact, inventory is currently down 60% form the 2018 level.
Homes are spending more time on the market before selling, but it’s still less time on market than it was last year.
Prices are not at their all-time high; they’re down $20,000. Despite the effect of mortgage rates, there is still internal and external demand for homes in the Tri-Cities regions. And its demand that outstrips current inventory and almost exceeds the snail’s pace growth of new inventory. October’s active inventory is nearly 500 existing homes fewer than it was in October 2020.
National Association of Realtors (NAR) Chief Economist Lawrence Yun expects an increase of 1% in the national median home price next year. Given current conditions, it’s likely the Tri-Cities market will outperform that.
Yun also expects home sales to decline by 7%. If that held for the local market sales would be at or slightly above the pre-pandemic level.
In some ways, local conditions look more like a stabilizing market – not declining, according to NETAR. And if the stabilization point is the 2018 or 2019 pre-pandemic markets – they were strong housing markets.
Categories: REAL ESTATE