These ResiClub Pro charts show the estimated home price overvaluation estimated by Moody’s from a pre-pandemic to a current level.

The Tri-Cities housing market is still readjusting from the pandemic housing boom, but at a slower pace than many U.S. markets. A similar situation exists for the other East Tennessee markets.

At the height of the boom, Moody’s Analytics estimated that U.S. home prices were overvalued by 29.4%. That was during Q2 2022. Real estate reporter and ResiClub Pro founder Lance Lambert reported in Fortune at that time that Moody’s overvalued estimates didn’t mean prices had to fall 29.4%. But it did mean they were above the trend relative to fundamentals like income.

During that Q2 2022 national peak, Tri-Cities markets had not peaked. Only Knoxville and Chattanooga parallel the national pace. The Tri-Cities metro markets didn’t peak until Q2 last year.

Since then, the percentage that they were overvalued has declined according to Moody’s fundamental model. Kingsport-Bristol has seen a decline of 3% to 53%. The Johnson City metro declined 5.1% to 42.1%. Markets with the current highest overvalued estimates are Morristown at 74% and Cleveland at 67% followed by Kingsport-Bristol.

According to Lambert’s most recent report, “At a national level, the decline in overvaluation has been driven by a combination of slowing house price appreciation and continued income growth.”

That’s the current landscape in the Tri-Cities. But the Tri-Cities and other East Tennessee markets have not seen as much adjustment as many other markets. Lambert writes that despite the recent bursts in inventory and months of supply, “it’s very possible a greater improvement in underlying fundamentals is on the horizon for the frosty pockets of Tennessee and North Carolina.”

According to Moody’s, “The Moody’s Analytics housing valuation measurer is the percent difference between actual house prices and house prices historically consistent with wages and salaries per capita and construction costs. The price of a house is ultimately determined by the value of the land upon which it resides, which is tied to the opportunity cost of the land as measured by wages and salaries, and the cost to build a home. Nationwide, approximately half of a home’s value is the land and the other half the structure, this varies considerably across the county.”

Categories: REAL ESTATE