Chattanooga home sales declined 10 percent in March from a year ago when a homebuyers tax credit pushed up sales, the Greater Chattanooga Association of Realtors reported Wednesday.
Of the 509 homes sold in March, at least a third - 32.8 percent - were foreclosed homes sales.
But in a piece of good news for the area, Hamilton County housing starts for the year are on track to top those of rival Knox County for the first year going back to 1993, according to The Market Edge, a regional real estate research firm.
The counties were neck and neck in 2010, with 786 home starts for Knox compared to 784 for Hamilton, but Hamilton pulled ahead in the third quarter of 2010 and in 2011 saw 187 home starts compared to just 137 in Knox.
This is partially a function of still-tumbling sales in Knoxville, which fell from a high of 3,405 housing starts in 2005 compared with a high of 2,232 that year in the Chattanooga area.
Despite the Chattanooga area's comparatively improving fortunes, overall home sales still are down over 2010.
But it's important to note that 2010's results were skewed by artificial demand brought on by the Homebuyer's Tax Credit, said Jennifer Grayson, association president.
"While [the tax credit] was helpful to us at the time, it also taught us, in the longer term, to pay attention to local conditions," she said.
The artificial bump in 2010 sales could make current numbers appear worse than they actually are, she said.
As temperatures climbed this year, March sales jumped 44 percent in a seasonal uptick from February's total of 353 homes sold. But research indicates that the market still is underperforming by about 20 percent, according to Dan Griess, president of the local Multiple Listing Service.
In fact, the Chattanooga housing market is at a 10-year low, he said, even though the population is much larger than it was a decade earlier.
The average number of days a home sat unsold on the market jumped three weeks to 156 days in March.
Griess said that easing loan restrictions and "addressing the weak jobs picture" would return the market to a normal sales level.
"We are repeating the message over and over to our elected officials that housing creates jobs at home," he said.
Inflation, a ballooning deficit and rising oil prices also are threats to continued housing growth, Grayson said.
In contrast to declining sales, the median home price in March increased for the fourth time in as many months. Home prices were up 2.5 percent to $125,000 over March 2010, "which spells a stabilization of pricing for homeowners and a wakeup call for buyers," said local Realtor Mark Hite.
The supply of housing inventory in Chattanooga dropped 41 percent to 12 months' worth of homes, a few months off from a normal level of seven months' supply.