Housing sales in the Chattanooga area continued their 8-year climb last year, rising to another record high in 2017 even with higher home prices and fewer houses for sale.
Despite continued challenges with inventory and prices - and new questions about tax changes that could limit the tax advantages of buying a home - realtors are expecting another record year in 2018.
"We had some incredible sales numbers in 2017 and I think we'll do just as good, if not better, in 2018," said Geoff Ramsey, a ReMax Realtor and president of the Greater Chattanooga Realtors. "I talked with Realtors across the country, and Chattanooga is definitely a market now where more people want to move to and increasingly they are."
Chattanooga Realtors sold a total of 9,766 single-family homes in 2017, up 1.1 percent over the previous record high set in 2016 and nearly double the sales reached in the wake of the Great Recession nearly a decade ago. The Greater Chattanooga Realtors said homes sold last year at a record high median price of $175,000, up 8.7 percent from the previous year.
Chattanooga home prices rose, on average, at a slightly higher pace last year than the U.S. average gain of 5.8 percent. But Chattanooga's median home price at the end of last year was still nearly 30 percent below the U.S. median home price of $246,800.
Home sales hit record high
The number of single-family home sales in Chattanooga rose 1.1 percent last year to a record high.2017 — 9,7662016 — 9,6232015 — 8,7552014 — 7,8282013 — 7,6342012 — 7,0382011 — 5,996Source: Greater Chattanooga Realtors
By the numbers
* $175,000 - Median home prices in 2017, up 8.7 percent* 59 - Average number of days homes were on the market last year, down from 65-day average in 2016* 95.6 percent - Percent of original asking price of typical sale in 2017, up from 95 percent the previous year* 2,530 - Inventory of homes for sale at the end of the year, down 26.2 percent from a year earlierSource: Greater Chattanooga Realtors
"Chattanooga is still an affordable market compared with most cities, but obviously higher home prices do affect the ability of some buyers, especially first-time home buyers, from getting the house they may want," Ramsey said.
Home prices have risen by more than 5 percent a year for each of the past six years, or more than double the average wage gain for workers in the same period, according to figures compiled by the National Association of Realtors and the U.S. Bureau of Labor Statistics. Lawrence Yun, the chief economist for the Realtors group, said he doesn't expect the growth in home prices to subside in 2018.
"Buyers throughout the country continue to be hamstrung by record-low supply levels that are pushing up prices- especially at the lower end of the market," he said.
But Yun said the housing market continues to benefit from the improving economy.
"Jobs are plentiful, wages are finally climbing, and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search," he said.
Crye-Leike Real Estate Services, the nation's fifth largest privately-held residential real estate firm and the largest in the Mid-South, recorded the best sales year in 2017 in the company's 40-year history.
Crye-Leike, which has more than 3,200 sales associates across nine states and operates nine real estate offices in the Chattanooga area, sold $6.5 billion in real estate, and closed 32,583 transactions last year.
"We anticipated there would be some challenges in real estate for 2017, inventory shortages were an issue and we saw an increase of annual tenure in homes," said Harold Crye, the company's co-founder. "Despite those challenges, our sales associates were able to excel and make it our best year to date."
Yun cautions that new tax law could limit some of the appeal of buying or owning a home, starting this year.
With a higher standard deduction, a growing majority of Americans are expected to simply take the standard deduction and not itemize their tax returns. That will simplify returns for many taxpayers, but it will limit the advantages of itemizing deductions for real estate-related expenses such as mortgage interest and property taxes.
Even for those who do itemize, the new law limits the deduction on mortgage interest to the first $750,000 of the loan (for homes purchased after mid-December 2017), and interest on home equity lines of credit can no longer be deducted.
Current mortgage-holders aren't affected, however, and Congress backed away from tax reform proposal to phase out mortgage deductions.
"There will be some impact from the tax change, but it obviously could have been much worse for us; and overall I still think we'll have another good year in 2018 even with these changes," Ramsey said.
Yun said the tax changes could even help spur some home sales by giving the economy a boost from the $1.5 trillion cut in tax rates over the next decade.
"In the short term, the larger paychecks most households will see from the tax cuts may give prospective buyers the ability to save for a larger down payment this year, and the healthy labor economy and job market will continue to boost demand," the NAR economist said. "However, there's no doubt the nation's most expensive markets with high property taxes are going to be adversely impacted by the tax law. Just how severe is still uncertain, but with home ownership now less incentivized in the tax code, sellers in the upper end of the market may have to adjust their price expectations if they want to trade down or move to less expensive areas. This could in turn lead to both a decrease in sales and home values."
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340