Balance returning to local housing market, but…


TRI-CITIES, Tenn. – October’s TCI Group’s Appalachian Highland Home Sales Tracker shows the regional housing market is making steady progress toward balance. But it’s not a traditional market balance.

For a long time, six months of inventory was the balanced-market standard that favored sellers and buyers evenly. But home-buying patterns and technology have moved that standard back to four months. And the pandemic added structural changes to the housing and broader economies that makes identifying balance a fragmented reality.

A lack of real estate inventory can create a balanced market as it reduces competition among buyers and gives negotiating power to purchasers. It can also help drive a more sustainable market with stable prices and reduced bidding wars. However, lack of inventory also leads to price appreciation and a shortage of affordable housing options.

The Atlanta’s Federal Reserve’s Homeownership Affordability Tracker shows NE TN housing has reached new lows with an increasing number of owners paying more than the 30% of income target. So far this year, the number of buyers who have opted to have less disposable income are pushing their spending for housing 40% of their income. That’s good news for sellers, but it means homeowners with less disposable income puts downward pressures on sales tax used to pay for local government services.

The TCI Tracker is a monthly annualized metric that shows while sales continue arching toward pre-pandemic levels, monthly inventories in some price bands are at balanced levels.

For example. The Kingsport region had five months of inventory in four price bands that ranged from $200K to $600K. That’s the top of the affordable market and the bottom of the move-up market. Greeneville had a similar October inventory pattern, but with more inventory at the top end of the affordable market.

Meanwhile, if you look at the region’s overall inventory, a different picture emerges. It has barely crawled above the two-month level.

Another sign that the market is becoming more balanced is the monthly sales to the original list price ratio. It was 97.9% in Sept. In August it was 98.4%. And the ratio has been under 100% for 12 straight months. The ratio is the average sales price to the original list price. Numbers below 100% show that, on average, properties sold for less than their original list price.

Monthly annualized existing home sales peaked in the 12 months ending in September 2021. Since then, they have slowly arched lower. Sales for the 12 months ending in October were 4% better than they were during the same 2019 per-pandemic market. One way to look at that comparison is structural growth.

Categories: REAL ESTATE