Despite a decline in economic activity and slower wage growth in the Chattanooga area over the past year, the local real estate market appears to be weathering the economic storm better than most of the country.
A new study found that Chattanooga avoided a decline in home prices over the past year even as prices nationwide dipped by more than 6 percent.
As a result, a new "Metro Monitor" by the Brookings Institution puts Chattanooga 48th among the top 100 metro areas for its overall economic performance during the current recession. The Brookings study gave similar, though slightly lower, performance ratings for the economies in nearby Knoxville, Nashville and Atlanta.
"The cities in the Mid-South were pretty much middle of the pack," said Alan Berube, research director of the Metropolitan Policy Program at Brookings and the report's co-author. "Chattanooga's housing prices held up better than most cities, but it is still suffering from job losses and a decline in economic output."
Jill McLean, a mortgage loan officer for BB&T and president of the Chattanooga Mortgage Bankers Association, said local home prices are holding up.
"We are in a bit of a declining market, but it's not near what we are seeing in many other parts of the country," she said.
Home prices nationwide fell 6.2 percent from the first quarter of 2008 to the first quarter of this year, the Brookings Institution report states. In the same period, home prices rose a modest 0.8 percent in Chattanooga -- one of 38 of the top 100 metro markets to show a gain.
Don Oakes, president of Mortgage South and a former chairman of the Tennessee Mortgage Bankers Association, said fewer Chattanoogans used pay-option adjustable rate mortgages with low initial teaser rates to buy their homes before the housing collapse two years ago.
"In California or Florida where many borrowers were trying to buy a $500,000 condo that they thought would be worth $600,000 the next year, they needed these type of loans to afford the purchase," Mr. Oakes said. "But in Chattanooga our prices have always been much more reasonable, and we just didn't see the need that many of these type of mortgages."
As a result, the share of properties that banks or other lending institutions had to take back because they failed to sell at auction also is running 41 percent lower in Chattanooga than the average of all metro areas.
In the first quarter of 2009, the share of foreclosed properties that fail to sell at auction was 1.77 per thousand. By comparison, the rate of those types of foreclosed properties was nearly four times as high in Atlanta and more than twice as high in Memphis. Foreclosure rates remained slightly lower in Knoxville and Nashville, however.
But with its manufacturing-based economy, Chattanooga is hardly immune from the economic downturn. Estimates of the region's economic output, or gross metropolitan product, showed Chattanooga with a 4.4 percent drop in the past year, exceeding the U.S. overall decline of 3.3 percent. Wages also grew in Chattanooga during the past year by 0.9 percent, slightly below the 1 percent growth nationwide.
The Brookings Institution study said the strongest performing metro areas are now San Antonio, Texas; Oklahoma City, Okla.; Houston; Austin; and Dallas. The worst performers are Detroit; Cape Coral, Fla.; Stockton, Calif.; Tampa; and Bradenton, Fla.
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