House prices off 6.5% as tax credit boosts sales

House prices off 6.5% as tax credit boosts sales

November 11th, 2009 in Business

Buoyed by the $8,000 tax credit for first-time home buyers, Chattanooga house sales improved this summer from springtime levels and helped limit the 3-year-old drop in home prices, according to reports released Tuesday by local and national Realtor groups.

The median price of existing homes sold in the third quarter in Chattanooga fell by 6.5 percent from a year ago. But local prices were still more than 5.2 percent above the lows reached last winter.

The decline in prices in metropolitan Chattanooga in the past year was only about half as much as the 11.5 percent dip in the median price of houses sold across the entire United States, according to the report.

The Chattanooga Association of Realtors said Tuesday that third-quarter sales by local Realtors totaled 1,624 homes. Third-quarter sales in Chattanooga were up by 10.9 percent from the second quarter of 2009 but remained 7 percent below the third quarter of 2008.

"The longer-term assessment -- calculating beyond the month-to-month regime that we're used to -- show us that real growth, no matter how slow, is beginning to take hold," said Nickie Schwartzkopf, president of the Chattanooga Association of Realtors.

The average number of days it takes to sell a dwelling in Chattanooga in the third quarter was 120 days, down from 133 days in the second quarter and 126 days a year ago.

In the July-September period, the median price of a house sold in Chattanooga was $124,100, or $8,600 less than in the same period a year ago. Nationwide, median home prices averaged $177,900 in the third quarter, or $22,500 less than a year ago, according to the National Association of Realtors.

Despite the yearly drop in value of existing houses, median prices this summer were up nationwide from the second quarter, suggesting that the recession-induced drop in values may be coming to an end.

"The decline in the national median price has moderated recently, and the shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas," National Association of Realtors economist Lawrence Yun said in a statement. "Rising sales from the expanded tax credit should stabilize home prices by next spring."

The national group projects that the congressional approval last week of an extension of the first-time homebuyer credit through next spring -- and the addition of a new $6,500 credit for many home buyers moving up from their existing homes -- should aid nearly 2 million Americans this year and help bolster prices.

"We can't underestimate just how powerful a catalyst the first-time homebuyer tax credit has been for the housing sector," Mr. Yun said.

Prices have trended down since the peak reached in 2006 and have fallen more nationwide than they have in Chattanooga. Nonetheless., Chattanooga buyers continue to enjoy comparatively cheap housing prices, according to the industry data.

Metro Chattanooga had the lowest median price among Mid-South cities during the third quarter, averaging 30.2 percent less than the U.S. average.