published Thursday, August 12th, 2010

Sales up, prices stable

  • photo
    Price reduction signs now sit on top of the "for sale" signs on the lawns of homes like this one in south-central Denver. (AP File Photo/David Zalubowski)

The end of homebuyer tax credits this spring helped push up housing sales and stabilize home prices in Chattanooga, according to Realtors’ sales data released Wednesday.

Home sales through Chattanooga’s multiple listing service jumped 30.5 percent in the second quarter compared with the depressed levels of a year ago.

After three years of falling home values, the median price of existing homes sold in Chattanooga this spring was unchanged from a year ago and remained nearly 25 percent below the U.S. median, the National Association of Realtors reported.

“The homebuyers’ tax credit and the extension of the closing date made for a winning combination for everyone, but now, it’s over,” Chattanooga Multiple Listing Service President Bobby Teems said. “Without a doubt, we expect a sharp drop-off in sales as the year progresses.”

To help spur the housing market last year, Congress granted an $8,000 tax credit for first-time homebuyers and a $6,500 credit for others who purchased a home by April 30 and closed by June 30.

During April, May and June, Chattanooga Realtors sold 1,919 homes in Southeast Tennessee and Northwest Georgia, or 449 more homes than in the same period a year ago in the region.

The average number of days it took to sell a Chattanooga house dropped from 132 a year ago to 128 this year, according to the Chattanooga Association of Realtors.

Improving sales helped stabilize prices after falling in each of the previous three years.

The National Association of Realtors reported that the median price of homes sold in Chattanooga this spring was $125,700, the same as a year ago and $12,800 more than this winter.

Nationwide, median home prices in the second quarter edged up 1.5 percent over a year ago to $176,900, according to NAR figures.

Randy Durham, president of the Chattanooga Association of Realtors, said the market is showing signs of improving, but he said the confidence of many homebuyers “has been badly shaken” by falling home values and rising unemployment. Despite Chattanooga’s relatively favorable prices for home buyers and near record low mortgage rates, Durham said some buyers remain cautious about the economy.

“While I continue to believe that the worst of this terrible recession is behind us, I also think that there are other very serious concerns that must be addressed, including unemployment and persistent difficulties in the lending market,” he said.

The lowest mortgage rates in decades haven’t been enough to energize buyers. Home loan applications were virtually flat last week, the Mortgage Bankers Association said Wednesday.

Chattanooga home prices showed signs of stabilizing despite an increase in foreclosures, however. Through July, the number of Hamilton County properties lost through foreclosure, 875, was up 8.3 percent over a year ago, according to the Hamilton County Register of Deeds.

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hcirehttae said...

"The end of homebuyer tax credits this spring helped push up housing sales and stabilize home prices in Chattanooga, according to Realtors’ sales data released Wednesday."

This is a very interesting and well-written story, but I'm confused about the lede. I think the news angle was oversimplified somewhere in the process. The "continuation" (not the "end") of homebuyer tax credits helped push up housing sales in the first two quarters of 2010, compared to first half of 2009. At the same time, the "continuation" of homebuyer tax credits through June 2010 had the (possibly unexpected) effect of stopping a three-year decline in home prices.

The first half of that makes basic economic sense; incentives attract first time buyers, at least for a while. But I don't see how the continuation of tax credits in the second year prevents further slide in home values, if it had no effect in the first year. That's not a straightforward effect at all; either sales affect prices or they don't. Perhaps there are other factors at work that override the tax credit influence: the stock of available housing, or the saleability (as opposed to the mere existence) of foreclosed properties, or some perverse effect of lower interest rates with higher credit standards.

And while we're at it: Why are our existing properties in Chattanooga valued 25% lower than the median for the rest of the country? That's a huge number -- or is it? It's not true of salaries, marketbasket prices, gas prices, taxes, etc. I think many people believed VW workers moving in would gently bump up home prices. They're not all buying brand-new homes, but some existing stock.

Is national median price even a meaningful statistic for comparison? Why don't we compare Chattanooga to similar-sized cities in the Southeast or across the country, instead of the blurry national median, which includes vast markets (California, DC, New York) that bear no resemblance to our community?

I'd be interested in what Mr. Flessner, Mr. Durham, and Mr. Teems have to say further on this subject.

August 12, 2010 at 3:07 p.m.
NoMyth said...

I think some analysis on the various price points (100k vs. 200k vs. 300k vs. 400k+) of housing would show a massive drop in sales for the 200k+ homes, with ever-declining sales numbers the higher the price point. I hope we will see a follow-up report in the coming months. Chattanoogans are often provided misinformation by local realtors about market value...prices for 200k+ homes will drop significantly in the coming year(s).

August 12, 2010 at 7:21 p.m.
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