Homes are seen under construction along Park Avenue off of Main Street on Thursday, May 12, 2016, in Chattanooga, Tenn.Rising home prices
The median price of homes sold in the MidSouth continued to rise in the past year, although they remained well below the U.S. average:Nashville - $204,700, up 9.8 percentHuntsville, Ala. - $184,000, 5.6 percentBirmingham, Ala. - $173,200, 6.3 percentAtlanta - $167,800, up 6.2 percentKnoxville - $157,000, up 5.2 percentChattanooga - $152,700, up 6.3 percentMemphis - $135,800, up 2.8 percentU.S. average - $217,600, up 6.3 percentSource: National Association of Realtors
With home sales and prices on the rise, Chattanooga home builders are plotting more new subdivisions and starting more new homes than at any time since before the Great Recession.
Home starts in the first quarter of 2016 jumped 30 percent from year-ago levels in the Chattanooga area, according to the MarketEdge compilation of residential building permits in the Chattanooga area. And after a record-high year for home sales in 2015, single-family home sales by local Realtors are up by nearly 10 percent more so far this year and are on pace to break another sales record in 2016.
"I'm as confident in the market as I've been in a long time," said Jay Bell, owner and agent for Bell Development Co., which is adding on to a half dozen of its suburban subdivisions this year and will soon break ground on another 68-lot development in Red Bank. "We've reactivated work on all of our developments, and we're starting some new ones."
On Ashmore Avenue in Red Bank, Bell Development will soon begin installing roads for its Midvale Highlands development that will ultimately have 68 cottage-style homes.
"We've had this property since 1982, and with the growth of the North Shore and interest in that end of Red Bank, we think there will be a strong market for these homes," Bell said.
The biggest homebuilder in Chattanooga, Pratt Homes, also is adding on to five of its new neighborhoods in Ooltewah, East Brainerd, Hixson and Cleveland, Tenn. Winn Pratt, president of Pratt Homes, said he hopes to build up his business to start 200 to 250 homes a year. Last year, Pratt led the market with 141 new home starts.
"Inventory is at historic lows and there is a real pent-up demand for new homes in the market," Pratt said.
Over the next five years, Pratt estimates there will be a demand for more than 9,000 new residential lots in Hamilton County and nearly 15,000 lots in the Chattanooga region.
The inventory of homes for sale in Chattanooga was down last month by 27 percent from a year ago as the pace of sales quickened and more people moved into Chattanooga.
Improving sales are helping boost the median price of homes sold in the Chattanooga area. During the first quarter, the median price of homes sold in the Chattanooga area rose by 6.3 percent from a year ago to $152,700.
Higher prices and bigger down payment requirements than before the Great Recession have kept some millennial buyers out of the market, especially those struggling to pay off student debt from college. But mortgage rates are now at the lowest level in three years and average Chattanooga home prices, while up from a year ago, are still 30 percent below the U.S. average home price of $217,600, according to a new report by the National Association of Realtors.
"Chattanooga is still a very affordable market, and with lower tax rates, we're seeing more workers and retirees want to live here," said Nathan Walldorf, president of the Greater Chattanooga Association of Realtors. "Chattanooga seems to be growing at a faster pace, and all of the signs look good for this year."
In the first quarter, builders got permits to start work on 500 new single-family homes in the Chattanooga area, which includes Hamilton and Bradley counties in Tennessee and Catoosa, Walker and Whitfield counties in Georgia. The gains come on top of a 19 percent increase in home starts in the area last year compared with 2014.
Dale Akins, president of The MarketEdge, said home starts parallel the employment growth in a market.
"Interest rates and other factors may be the bells and whistles, but the fuel in the engine is almost always jobs," said Akins, who predicts the Chattanooga market will add at least 6 percent more home starts in 2016 over last year.
Volkswagen and its suppliers, including Gestamp and Yanfeng Automotive, are planning to add more than 3,000 jobs over the next couple of years, which University of Tennessee economists project ultimately will expand through the economy to add an estimated 9,800 local jobs.
Home buyers also are benefiting this spring from the lowest mortgage interest rates in three years.
Long-term U.S. mortgage rates fell this week for a third straight week, posting new lows for the year.
Mortgage buyer Freddie Mac said Thursday that the average 30-year fixed-rate mortgage dipped to 3.57 percent from 3.61 percent last week. It's far below its level a year ago of 3.85 percent.
The average rate on 15-year fixed-rate mortgages eased to 2.81 percent from 2.86 percent last week.
In his midyear economic forecast released Thursday, Lawrence Yun, chief economist of the National Association of Realtors, forecast existing sales should finish 2016 at 5.4 million homes - the best year since 2006. After accelerating by 6.8 percent in 2015, the national median existing-home price is forecast to rise this year between 4 and 5 percent.
"The housing market continues to expand at a moderate pace in spite of the fact that home prices are rising too fast in some areas because of insufficient supply fueled by the grossly inadequate number of new single-family homes being constructed," Yun said.
Contact staff writer Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.