Chattanooga home prices outpaced the nationwide increase last year and ended 2020 at a record high median price of $220,100 in the fourth quarter, according to a new report by the National Association of Realtors.
The median price of single-family homes sold in Chattanooga during the fourth quarter was up 18.2% from a year earlier, increasing more than 22% faster than the nationwide average increase of 14.9%.
Although the typical Chattanooga home was still priced 30% below the U.S. median price of $315,900, rising sales and a tight inventory of homes in Chattanooga combined to push up the cost of housing last year.
"I've been in the real estate industry since 1997 and some of these prices are just crazy to me," said Robert Backer, a local real estate agent with Coldwell Banker Pryor Realty, Inc. who is the 2021 president of the Greater Chattanooga Association of Realtors. "There's a lack of inventory on the market with homes selling so quickly and we're seeing a lot more interest of people moving to Tennessee and the Chattanooga area from elsewhere in the country."
U-Haul said Tennessee was the No. 1 state for one-way inbound rentals in 2020, displacing Florida as the top draw state last year. Earlier this month, PC Magazine also named Chattanooga as the best city in America for remote work based upon its internet service and cost of living deemed most important during the pandemic.
Last year, the typical single-family home sold by a Chattanooga Realtor was on the market for only 43 days - five days less than the previous year and less than half the sales time of a decade ago.
Home prices jump
In the fourth quarter of 2020, the median sales price of homes sold by a Realtor rose by double-digit levels over a year earlier.* Nashville: $310,700, up 11%* Atlanta: $275,200, up 18.6%* Huntsville, Ala.: $252,800, up 4%* Birmingham, Ala.: $246,500, up 11.7%* Knoxville: $246,100, up 17.5%* Chattanooga: $233,600, up 18.2%* Memphis: $229,100, up 20.5%Source: National Association of Realtors.
Although homebuilders continue to construct new homes in the Chattanooga area, rising land prices and costs for building materials, especially lumber, have pushed up the price of new homes, Backer said. The supply is not keeping pace with a demand that has grown as more families are choosing to leave big cities and head to smaller and cheaper cost-of-living towns like Chattanooga.
But Chattanooga's cost-of-living advantage is being challenged by the jump in home prices, which are squeezing many first-time homebuyers out of the market.
"The average, working family is struggling to contend with home prices that are rising much faster than income," said Lawrence Yun, chief economist for the National Association of Realtors. "This sidelines a consumer from becoming an actual buyer, causing them to miss out on accumulating wealth from homeownership."
Every metro area tracked by the National Association of Realtors through the fourth quarter of 2020 witnessed home prices grow from a year ago. Chattanooga was among 86% of the metro areas that saw double-digit price increases.
"Mortgage rates reached record lows, thereby driving up the demand," Yun said. "At the same time, inventory levels also reached record lows, leading to grim inventory conditions of insufficient supply in the fourth quarter."
Both Yun and Backer said they expect mortgage rates to remain historically low this year, although higher than at the end of last year, and the housing market should remain healthy through 2021.
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.