Even with mortgage rates climbing, home prices in many areas of the state continue to climb. Buyers have dismissed the rates in the Tri-Cities area as parts of the housing market are trending ahead of the economy. Home resale rates in the Tri-Cities area continue to outpace last year, by more than 12%. Realtors and sellers are holding on to a positive attitude, with sales averaging just under $38,000 more than in 2020.
Mortgages are trending strong in Northeast Tennessee. Sales loans are nearing the same levels of refinancing loans, which had taken over the local mortgage market since late 2019. Foreclosure rates average just over 2% in Bristol and Kingsport areas, and right at 2% in the Johnson City metro area. These rates are below historical averages.
As we round the seasons and come fully into autumn, there are decreased expectations with the market normally cooling off in cooler months. While sales are down, as is the case historically, there is no talk of price drops. The nature of the real estate market doesn't usually fall to seasonal trends, in fact there are often sales spikes as Thanksgiving approaches.
Home Price Expectation Survey
More than a hundred economists, investors, real estate strategists, and real estate experts participate in the Home Price Expectation Survey. They come together and develop a consensus on the housing market for the next five-year period. Their most recent forecast looks for sales to increase by 6% for this year, with the increase rate dropping by close to 0.5% each year through 2025.
The markets have exceeded expectations so far in 2021. The local market was already at 14.3% as of October, according to the Northeast Tennessee Association of Realtors. 14.3% is a dramatic increase above the historical market benchmark. The local average has been just under 3% for the last 20 years.
The coming fall
Downward pressures are culminating to moderate prices in the housing market. These include expectations that the FED will have to start normalizing interest rates. This will bring the end to 3% (and lower) mortgage rtes. Lawrence Run, Chief Economist for the National Association of Realtors, expect next year's rates to be in the 4% range. This effectively reduces the buying power of would-be home buyers compared to this year. The rate forecast alone could have some potential buyers ready to make a move before the year's end.
Existing homes are growing in the marketplace, increasing the inventory for realtors. This comes at a time when Washington County, Tennessee is seeing an increase in the number of new homes available as well. Demand has driven prices up, and we may see some price reductions if the inventory outpaces demand.
The number of buyers active in the market this time of year gives them an edge over sellers. It's also an opportune time for them to seek financing before rates are expected to increase.
Even with the pandemic putting the local economies in uncertain territory, we've made much progress as a region. The region's real estate market had made a dramatic comeback.
According their website at the Northeast Tennessee Association of Realtors, Commercial Committee Chairman, Cassie Petzoldt, says the 463 transactions for the first 10 months of this year is a record. Year-to-date transactions have improved 61% over this time last year.
“Local investors are more active, and increasing numbers of out-of-area investors are shopping the Northeast Tennessee - Southwest Virginia marketplace.” - Cassie Petzoldt, Commercial Committee Chairman, Northeast Tennessee Association of Realtors
The most active sectors of the commercial market are office, retail, industrial, vacant land, and shopping centers. The Wall Street Journal reported office buildings, and retail are not in the spotlight as they have been historically. Instead, industrial properties and e-commerce distribution centers are among the biggest drivers of the U.S. commercial restate market. The local real estate market is on a somewhat different track than the national market referenced by the Wall Street Journal.
Commercial category activity in the area is on the rise:
- Office - up 17%
- Retail-commercial - up 40%
- Industrial - up 15% (a lack of inventory has limited growth)
- Vacant land - up 16%
- Shopping Center - up 12%
- Multi-Family - up 2%
- Special Purpose - up 2%
The Tri-Cities real estate market is moving, and outperforming the national average. The latest census numbers show more people moving into the state than out. Investors are also seeking to maximize gains by looking at areas where growth rates can be maximized. Tertiary areas like the Tri-Cities had been looked over in the past, as larger metropolitan areas were considered for development and expansion. The expansion of distribution centers, as with the Amazon Distribution Center in Bristol, Virginia, are continuing to have ripple effects across the area.