We are halfway through the year and it seems our collective attention has shifted from monitoring price and sales gains to eagerly anticipating more new listing activity on the part of sellers. This shift is the result of an imbalance between strong demand for homes and constrained supply. In some markets across the country, purchase and sales agreements are being written up directly after a showing. While this is good news for sellers, it does cause a sense of urgency among buyers. And we again are starting to see multiple offer situations in Northwest Georgia and Southeast Tennessee. The market as a whole has summertime heat.
Our most recent monthly market's statistics show more positives for the Greater Chattanooga region. New listings are up 5.6 percent to 1,146, which follows the year-to-date trend of new listings increasing by 3.9 percent.
Closed sales continue to rise, with an 8.9 percent increase to 683 from last month and a 15.1 percent increase from this time last year.
In May, inventory shrank 8.1 percent to 4,876 units, with the month's supply of inventory decreasing 15.7 percent to 8.6 months, indicating that demand increased relative to supply.
With a decrease in inventory, prices continue to rise, with the median sales price being up 5.2 percent to $144,000, which follows the year-to-date increase of 2.2 percent. Even more good news for sellers is that days on market decreased 2.4 percent to 122 days, which again follows the year-to-date comparison of a 6.8 decrease.
On the national scene, interest rate risk is back in the headlines after Federal Reserve Chairman Ben Bernanke's latest testimony on Capitol Hill. The Federal Reserve Bank is considering decreasing its $85 billion a month bond asset purchases, which have been holding interest rates at or near historic lows. This is mostly the result of an improving job market, which is a good thing for real estate.
In a recent blog post, Lawrence Yun, chief economist for the National Association of Realtors, indicates that mortgage interest rates will be near 5 percent a year from now, and even higher in 2015 and 2016. "Certainly, rising rates are bad news for buyers and some potential homebuyers will be pushed out of the market," said Yun. He added, however, that "there is one major compensating factor that can easily neutralize the negative impact of rising rates.
As Realtors well know, there are many good potential buyers who have been denied a mortgage that in past normal years would have easily qualified." Yun anticipates rising home prices will result in fewer loan defaults, which will help banks be more profitable and, in turn, aid in a return "to normal underwriting standards from the current very tight conditions."
Thus, a slight rise in rates, ultimately, will be a good thing and enable more buyers to obtain a loan.
All of this to say that here in the Greater Chattanooga region, we anticipate the monthly and yearly trends to continue for the remainder of 2013. So hold on and get prepared for a hot summer in real estate.
The Greater Chattanooga Association of Realtors, a regional organization with more than 1,400 members, is one of more than 1,800 local boards and associations of Realtors nationwide that comprise the National Association of Realtors. GCAR services Hamilton and Sequatchie counties in Southeast Tennessee and Catoosa, Dade and Walker counties in Northwest Georgia. For more information, visit gcar.net.