Fueled by record low mortgage rates and the migration of many remote workers to East Tennessee, Chattanooga area home builders started construction on 33% more houses this year than they did a year ago.
But a housing analyst who studies construction trends across the Mid-South said the unprecedented jump in home starts is still not enough to keep up with the current demand.
Dale Akins, founder and president of The Market Edge which tracks building permits in dozens of Mid-South markets, said home building now is constrained only by the ability to get land, materials and labor.
“Demand is a given in every price range,” Akins told the Home Builders Association of Chattanooga during a membership luncheon Tuesday. “For the first time in 30 years, I don’t think the building permit trends reflect the demand side of the supply and demand equation. We are in uncharted territory.”
The Market Edge said the number of single-family building permits taken out by builders in the first six months of 2021 was up by 44% in Hamilton County, by 34% in Catoosa County and by 20% in Bradley County compared with the same period a year ago. In the five biggest counties in the Chattanooga region, a total of 1,450 new homes were started in the first six months of 2021, or 458 more than in the same period a year earlier.
The local gains were similar to the average 33.8% increase in home starts across all of the markets tracked by The Market Edge.
Akins said interest rates “are incredibly low” and that is propelling more home buying from both investors and homeowners. The 30-year mortgage rate that was in double digits a couple of decades ago is now pegged at 2.75% and 15-year mortgages have dropped to just 2.125%, according to the latest figures by Credible. Investors are buying homes for rental income and other home buyers are investing more at home as they work remotely and spend less time at the office.
At the same time, the pandemic has disrupted supply chains for many building materials and labor shortages are also limiting some home construction, Akins said.
Rising real estate
Home starts and prices all rose at double-digit levels in the first half of 2021 in the Chattanooga area, shortening the time most houses are on the market.* 1,450 – Number of home starts in the Chattanooga area in the first half of 2021, up 33% from the same period a year ago* $265,000 – Median sales price of single-family in Chattanooga in July, up 14.1% from a year earlier* 16 – Average number of days a typical home is on the market, down 62.8% from a year earlierSource: The Market Edge, Greater Chattanooga Realtors Multiple Listing Service
As a result, demand continues to exceed the supply of homes on the market, especially now that remote work is allowing more Americans to migrate to less expensive and more attractive places with high-speed internet such as Chattanooga.
“Cities with a high cost of living will have to compete for workers,” Akins said. “The job is not moving – only the person doing the job.”
Chattanooga home prices average about 30% below the national average. But home prices are rising significantly in Chattanooga. Last month, the median price of homes sold in the Chattanooga area rose to $265,000, up 14.1% from a year earlier.
With more demand than supply, the typical home in Chattanooga sold last month in only 16 days, the shortest period on record.
“Realtors like me knew that July was a scorching month in real estate,” said Robert Backer, a real estate agent with Coldwell Banker Pryor Realty who is president of the Greater Chattanooga Realtors association. “And the market remains hot with little sign of cooling off anytime soon.”
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340