Home prices last year in Chattanooga rose nearly twice as fast as the national average as local Realtors sold a record number of houses during 2018.
The median price of single-family homes sold by Chattanooga Realtors in the fourth quarter of 2018 rose 7.7 percent from a year ago to $191,200, according to data released Tuesday by the National Association of Realtors. Despite the $13,600 median price increase in Chattanooga homes last year, the typical single-family home in Chattanooga was still priced 25.8 percent less than the U.S. average in late 2018.
Nationwide, the National Association of Realtors said inventory levels and market prices grew at a slower pace in the fourth quarter with median prices nationwide were up 4 percent from a year ago.
Lawrence Yun, chief economist for the National Association of Realtors, said in light of the various hurdles for 2018, the close of the fourth quarter was promising.
"Home prices continued to rise in the vast majority of markets but with inventory steadily increasing, home prices are, on average, rising at a slower and healthier pace," he said. "Housing affordability will be the key to sustained healthy growth in the housing market in the upcoming years. That requires more homebuilding of moderately priced homes."
In Chattanooga, the head of the Greater Chattanooga Realtors, Kim Bass, said higher home prices and mortgage rates in the fourth quarter began to curb some market activity by pricing some potential buyers out of the market.
"Despite a strong U.S. economy, historically low unemployment and steady wage growth, home sales began to slow across the nation late last year," Bass said. "What could be causing the slowdown? Economists point towards a combination of high prices and a steady stream of interest rate hikes by the Federal Reserve."
In a move described as a patient approach to further rate changes, the Fed did not increase rates during January 2019. The lack of increase seems to be the Fed's response to the growing affordability conundrum.
Total existing-home sales, including single family homes and condos, decreased 1.8 percent to a seasonally adjusted annual rate of 5.180 million in the fourth quarter, down from 5.273 million in the third quarter, NAR said.
Nonetheless in Chattanooga, home sales during 2018 rose 1.9 percent from the previous year to top 10,000 for the first time ever. Local Realtors closed on 10,009 home sales last year, or 183 more than in 2017.
Chattanooga's median home price grew last year by more than twice the average increase in earnings, hurting the affordability of the typical home in Chattanooga. Nonetheless, the typical home n Chattanooga still sold for only 15 percent as much as the median price in the San Jose Silicon Valley area of California, where the median home price at the end of 2018 was $1.25 million.
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