Home prices fall

Chattanooga market fares better

Chattanooga home prices have dropped only one fourth as much as the national average from the peak reached before the current housing slump, according to a new study of America's housing markets.

But in a forecast of economic trends, the research firm Local Market Monitor Inc. predicts that home prices in Chattanooga and most U.S. markets will continue to slide over the next two years before rebounding in 2012.

Carolyn Beggs, chief operating officer for Local Market Monitor, said home prices in the metropolitan Chattanooga area averaged $171,146 this summer. That was still about 9 percent above where they should be based upon current economic conditions, Beggs said.

"We don't necessarily think that Chattanooga is an overpriced market because the current price is still pretty close to the what we consider the equilibrium price is for the market," she said. "Basically, the market has been relatively flat and we don't anticipate prices to appreciate much for the next couple of years."

Four years ago, many markets in California were priced nearly twice what Local Market Monitor calculates as the proper affordable level, or the equilibrium price, and prices continued to rise.

"That was an unsustainable bubble," Beggs said.

From the peak reached in the first quarter of 2009, home prices in the 6-county Chattanooga metropolitan area have fallen 3 percent. Nationwide, home prices have dropped 12 percent from the peak, Beggs said.

Local Market Monitor, a Cary, N.C., company that tracks local economic and housing data in major U.S. markets, projects home prices in Chattanooga will drop another 3 percent in the next 12 months and another 1 percent in the following year before beginning to rebound in two years.

Metro Chattanooga, which includes Hamilton, Marion and Sequatchie counties in Tennessee and Catoosa, Dade and Walker in Georgia, "seems to be in a relatively stable situation," Beggs said. Among Mid-South metro areas, only Huntsville, Ala., is projected to avoid further price declines and Chattanooga is expected to be the second best in the region.

Chattanooga Realtors said the local market should be aided by new jobs and investments from Volkswagen and Alstom Power, along with the suppliers to those factories. Such firms have already hired more than 1,200 workers and are projected to more than double that number in the next two to three years.

"We are seeing home sales and leases to workers coming in for Volkswagen and Alstom," said Nickie Schwartzkopf, manager and broker for ReMax Properties LLC. "Our market has done better because we've still had employment growth and in this market jobs are key."

Unemployment in metropolitan Chattanooga declined last month by 0.3 percent to 8.7 percent - the lowest level since January 2009.

Randy Durham, president of the Chattanooga Association of Realtors, said home prices fell over the past two years as jobless rates grew and consumer confidence dropped.

"We've definitely seen a decline in value, but I hope we are nearing the trough in home prices," he said. "Until consumers have confidence in the market and see employment coming back, the market is probably going to be soft."

Real estate appraisers said local home prices may be stabilizing after falling for the past couple of years. But predicting where prices will go from here is problematic.

"The one thing that is certain is that there is a lot of uncertainty," real estate appraiser Henry Glascock said. "I've been in this business for 37 years and I've never seen anything like this.

"Typically a bad market will last a year," he said. "This has been going on for at least two years and it will be at least another year."

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