Chattanooga residential sales drop in past year, but prices still rising

Note: This was story was updated at 9:29 p.m. Saturday to correct an earlier version that listed the wrong sales totals for the Jay Robinson and Grace Edrington teams. 

Home sales declined in Chattanooga last year to the lowest level in the past five years as higher mortgage rates squeezed more homebuyers out of the market.

But the typical home sold by Chattanooga Realtors in 2023 still had a higher price as demand for housing continued to bid up prices with historically low inventory levels of homes for sale on the market.

The number of homes sold in the Chattanooga area declined nearly 12.5% in 2023 compared with the previous year, and Realtor-assisted home sales last year were nearly 22% below the peak sales year in 2021.

But the drop in sales didn't appear to cut the price of homes, which rose to record levels in Chattanooga last year. The median price, or midpoint, for all Chattanooga homes sold in 2023 rose another 3.4% from the previous year to a record high of $315,000. The average price of homes sold, which takes all home sales and divides that total by the number of homes sold, rose nearly 4% last year to $367,491.

Kadi Brown, co-owner and broker for The Group and the 2024 president of the Greater Chattanooga Association of Realtors, said mortgage rates have doubled in the past couple of years, making it much harder for first-time buyers to qualify and pay back mortgage loans. Home sales in Chattanooga reached an all-time high in 2021, when 30-year mortgage rates plunged to around 3%, but home borrowing costs have since doubled for most homebuyers even as home prices have also doubled in just the past eight years.

"Prices continue to rise here and other areas regionally and nationally," Brown said. "This is continually contributed to the overall lack of housing inventory and continued demand."

But Brown said home prices aren't rising as much as in previous years and Chattanooga's decline in home sales was a third less than the nation as a whole last year.

Nationwide, sales of previously occupied U.S. homes sank by 18.7% last year to a nearly 30-year low. The National Association of Realtors said existing U.S. home sales totaled 4.09 million in 2023, the weakest year for home sales since 1995 and the biggest annual decline since 2007.

The median national home price for all of last year edged up just under 1% to record high $389,800, the association said.

(READ MORE: High interest rates, high prices, low inventory for Chattanooga area real estate create quandary for potential homebuyers, sellers)

Jay Robinson, a Keller Williams real estate agency owner and Chattanooga's top selling agent last year, said the local housing market "remained surprisingly resilient in 2023" considering the jump in interest rates and predictions of an economic recession that, at least so far, has not materialized.

"The inventory of homes on the market is up, but it is still not up so much to put a downward pressure on most home prices," Robinson said in telephone interview. "Chattanooga remains an attractive market, and even though our prices have been going up, they are still less than the national average."

At the end of December, there were 1 million homes on the market nationwide, the National Association of Realtors said. While that's a 4.2% increase from a year earlier, the number of available homes remains well below the monthly historical average of about 2.25 million.

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Chattanooga home sales drop last year but home prices continue to rise

James Perry, a broker with the James Co. who has been selling real estate in Chattanooga for more than three decades, said he thinks the Chattanooga market is outperforming the nation due to its appeal to relocating residents and businesses.

"The real estate market in our tri-state area remains strong, and it will continue to remain strong in both commercial and residential sales," James said in an email statement. "The array of features and benefits Chattanooga has to offer makes me proud in being a lifetime citizen of this beautiful Scenic city."

Multimillion-dollar sales

In 2023, 31 homes sold for more than $2 million in Hamilton County, including the second highest Chattanooga home sale ever in February when an Arizona couple bought a 11,156-square-foot, six-bedroom home on Wolftever Creek in Ooltewah for $6.35 million. Only the 2022 sale of a riverfront mansion in Lookout Valley to a Montana investor for $8.7 million was bigger in the history of Chattanooga home sales.

But an even bigger home sale negotiated last year fell apart when the prospective buyer was found dead along with his wife and daughter in a Boston suburb.

Rakesh "Rick" Kamal, a software developer and entrepreneur, agreed last year to buy Bernice Sale's mansion on Chickamauga Lake in Harrison for $16.5 million, but three days after Christmas, Kamal was found at his own 21-room home in Massachusetts with his wife and daughter in what police say was a murder-suicide, according to police reports. Kamal, who is accused of shooting his wife and daughter before turning the gun on himself in his home in the Boston suburb of Canton, was reportedly facing eviction from his $6.7 million home and was running out of money.

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Kamal had exaggerated his business credentials for years, according to the Boston Globe, and was able to show bank records and other claims to negotiate an agreement to buy the 23,000-square-foot home in Harrison that Sale and her late husband, David, built on Chickamauga Lake.

James Perry, who is the listing agent for Sale's mansion, told the Boston Globe that Kamal had been in talks and negotiations about buying the lakefront home for more than a year and had shown bank statements to the seller's attorney proving his "ability to purchase" the house for $16.5 million. Last August, Kamal and his relatives toured the Sale mansion and met with contractors before coming to a verbal agreement to buy the house, Perry said.

But in September, Kamal said he was leaving for China on a business trip and couldn't respond to emails or texts. Perry said a contract for Kamal to buy the Sale mansion was sent to the software developer, but Kamal never signed the agreement.

The Boston Globe reported Kamal had kept his financial shortfall a secret and said Kamal's apparent wealth was "a house of cards" that collapsed once the bills came due.

Kamal's death marked the second time a proposed sale of Bernice Sale's lakefront mansion has collapsed. In 2022, Christopher R. Redlich, of San Clemente, California, negotiated to buy Sale's home for $17 million. But after making a $1 million down payment, Redlich canceled the purchase, blaming deed restrictions on the property by TVA that he said were not properly disclosed in the agreement.

Home inventories

Despite the delays in selling the Sale mansion, most houses in Chattanooga sold last year in about a month's time from when they were listed. The average selling period for homes listed through the Realtors' multiple listing service last year was 34 days, up from the record low of only 20 days in 2022.

At the end of the year, Chattanooga had a 2.4-month supply of homes on the market -- the highest number since before the pandemic in 2019 but still below the long-term average. New listings in Chattanooga last year were down by 10.4%, according to a year-end report by the Greater Chattanooga Association of Realtors.

(READ MORE: Chattanooga 28th most overvalued housing market in the country, study says)

Lisa Sturtevant, chief economist at Bright MLS, said a dearth of homes for sale kept many would-be homebuyers and sellers on the sidelines.

"Prospective homebuyers have been shut out of the market by a lack of inventory," Sturtevant said. "If there had been more listings on the market in 2023, we would have had more home sales."

Still, a pullback in mortgage rates since late last year, and forecasts calling for a further rate declines this year, are fueling hopes that home sales will begin to bounce back from their dismal showing in 2023.

"The latest month's sales look to be the bottom before inevitably turning higher in the new year," National Association of Realtors Chief Economist Lawrence Yun said in a new report on the housing market. "Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months."

Yun said first-time homebuyers who don't have any home equity to put toward their down payment continued to have a tough time getting into the housing market. They accounted for just 29% of all homes sold last month, down from 31% in November and December 2022. They've accounted for 40% of sales historically.

"Renters, potential first-time buyers (are) really struggling to get into the market," Yun said.

(READ MORE: A boom in apartment construction is helping to curb rents but not all renters will benefit)

Mortgage rate trends

Mortgage rates were trending lower since November, although borrowing rates edged higher last week, according to mortgage buyer Freddie Mac.

The average rate on a 30-year home loan last week was 6.69%, a six-week high and a higher rate than the 6.13% rate for 30-year loans a year ago.

If rates ease in the future, as many economists expect, that should help boost demand heading into the spring homebuying season.

Still, the average rate remains sharply higher than just two years ago, when it was 3.56%. That large gap between rates now and then has helped limit the number of previously occupied homes on the market by discouraging homeowners who locked in rock-bottom rates from selling.

The Associated Press contributed to this report. Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.