House prices in Chattanooga, sales subdued in July

Chattanooga home prices and sales continued to outpace the national average this spring, but the local housing market appears to be slowing as rising interest rates and construction costs squeeze more buyers out of the market.

A new report from the National Association of Realtors shows home sales and prices in the Chattanooga area grew faster than the US average during the second quarter of the year. The median price of single-family homes sold in Chattanooga in April, May and June rose 17.8% from a year earlier, as homes sold this spring at the fastest pace on record, with many buyers looking to buy before interest rates rise.

Chattanooga realtor Jay Robinson, Chattanooga’s top-selling realtor last year, said price and sales gains earlier in the year reflected “the latest rush to the door” for close the sales before mortgage rates rise under the Federal Reserve’s good. hyped approach of steadily raising interest rates to slow the economy.

“Buyer traffic is slowing, although seller expectations are still extremely high,” Robinson said in a phone interview on Monday, “I think this will be a market adjustment that will continue to happen over the next three to next four years. months.”

Robinson and other realtors said higher interest rates and the Federal Reserve’s efforts to slow the economy appear to be limiting residential real estate sales, but the market still remains quite robust by historical standards. .

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House prices in Chattanooga, sales subdued in July

The number of single-family homes sold by Chattanooga Realtors in July fell 12.7% from the June total, while the median price of those homes sold also fell 5.7% from the previous month – ​​the first monthly decline so far this year, according to the Greater Chattanooga Realtors Association.

“House prices have risen at a rate that far exceeds wage gains, especially for low- and middle-income workers,” Lawrence Yun, chief economist for the National Association of Realtors, said in a report the week last. “Overall, the deceleration in domestic prices has inevitably followed the slowdown in sales, giving well-positioned potential buyers a welcome bit of relief. Recent mortgage rate cuts will draw additional buyers into the market, especially in places where house prices are still relatively affordable and where jobs are added.”

The $310,000 price paid for the typical Chattanooga homebuyer last month was still up more than $50,000 from the same period a year ago and was more than $100,000 higher than the median price paid for the typical Chattanooga home before the pandemic three years ago.

But Chattanooga home prices, on average, were still 5.7% lower than in June and 26.2% lower than the U.S. median price of $413,500 last month. Chattanooga’s price advantage, combined with the absence of any state income tax, drew many buyers to Tennessee from the more expensive big city or West Coast markets.

Chattanooga developer Jack Kruesi, who is building the Wild Ridge subdivision atop Signal Mountain, said about half of the 65 homes already sold in his development have been purchased by workers, retirees or others wanting move to a more affordable and scenic environment.

House prices rise in the Mid-South

Home prices have risen in all Mid-South metro markets faster than the US median price over the past year. The median price of homes sold in the second quarter of 2022 and year-over-year increases were greatest in:

— Nashville: $418,500, up 19.8%

— Atlanta: $379,700, up 20.1%

— Knoxville: $336,000, up 23.6%

— Huntsville, Alabama: $327,600, up 20.1%

— Birmingham, Alabama: $318,800, up 15%

— Chattanooga: $299,800, up 17.8%

— Memphis: $288,000, up 14.7%

Source: National Association of Realtors

“As more and more people have started working remotely or discovered the appeal of living in this area, we have seen people from all over the country move here, and for many of them the Our home prices are still very attractive,” Kruesi said.

Kruesi said home prices are being pushed higher by the growing scarcity of easily developable land in the Chattanooga area, combined with inflation and higher interest rates that have pushed up building materials and prices. labor costs and higher mortgage rates.

Nationally, the median price of existing single-family homes in the second quarter topped $400,000 for the first time, rising 14.2% from a year ago to $413,500.

Chattanooga remains cheaper than most Mid-South metro markets. Median home prices are lower than Chattanooga, only in Memphis, among major metropolitan markets in Tennessee and Georgia.

July home sales by the numbers

Home sales and median prices in Chattanooga last month fell from levels seen this spring as rising mortgage rates began to cool the local housing market

– $310,000: median house price in July, compared to $328,725 in June

— 999 home sales completed, compared to 1,144 in June

– 1,062 pending home sales, compared to 1,089 in June

— 15: the average number of days on the market to sell a home, up from the record high of 13 days in June.

Source: Greater Chattanooga Realtors Association.

Beyond rising real estate costs, rising mortgage rates are driving up monthly home purchase payments. Last week, the average rate was 5.56% on a 30-year fixed mortgage and 4.96% on a 15-year mortgage, according to Bankrate.com. That’s double mortgage rates from a year ago.

As a result, housing affordability dropped dramatically in the second quarter of 2022, Yun said. The monthly mortgage payment on a typical existing single-family home in the United States with a 20% down payment jumped to $1,841. That’s an increase of $444 — or 32% — from the first quarter of this year and $612 — or 50% — from a year ago.

Families typically spent 24.3% of their income on mortgage payments, down from 18.7% the previous quarter and 16.9% a year ago.

NAR reported that first-time buyers typically spent 36.8% of their household income on mortgage payments, down from 28.7% in the previous quarter. A mortgage is considered unaffordable if the monthly payment (principal and interest) is more than 25% of the family’s income.

Contact Dave Flessner at [email protected] or 423-757-6340 or on Twitter at @Dflessner1.

Christy J. Olson