Despite a year-end drop in home sales, Chattanooga is projected to be one of the nation's top 10 markets next year for gains in home sales and prices as home buyers continue to move toward growing markets with more affordable housing options.
Chattanooga ranks as the ninth hottest market for 2023 in a new ranking by Realtor.com. The 2023 top housing markets forecast projects Chattanooga's median home price will jump another 8.2% next year, while the number of homes sold in Chattanooga is projected to increase another 2.9% next year.
Chattanooga was the only Tennessee city and one of only four in the southeastern United States on the top 10 list of growing cities for home sales in 2023.
"We expect the ongoing high cost of housing to be a major factor shaping the decisions of households choosing how and where to live, whether they rent or own their home," Danielle Hale, chief economist for Realtor.com said in a new report on the top 10 growing real estate markets. "With affordability top of mind, the markets where sales and prices are projected to show the most growth are low-cost, mid-sized markets in the Northeast, South and Midwest. These areas are home to manufacturing, government and education and health care industries that are expected to continue hiring in 2023."
Despite a double-digit jump in median home prices through most of 2022, the typical house in Chattanooga was priced in November with a median price of $295,000, or about 30% below the U.S. median home price. That price advantage, combined with the growing number of residents relocating to Chattanooga, should continue to push up home sales next year despite the tweaking market, according to the Realtor.com study.
"The secret is out about the greater Chattanooga area, and with our relatively low cost of living, our ground-breaking internet speeds, and abundance of outdoor activities, our Scenic City is positioned to be home to the many newcomers moving to our area," Derek English, the 2022 president of Greater Chattanooga Realtors, said in response to the new Realtors.com forecast.
Linda Brock, one of the top selling residential real estate agents in Chattanooga, said the local housing market has continued to grow for more than a decade and she has continued to book major home sales going into the winter months.
"Since the month of November, I have placed under contract $8.9 million in only five homes," Brock said, adding that another $4 million offer she made on behalf of a home buyer ended up going to another buyer.
For all of its price advantage over many California and major urban markets, however, Chattanooga home prices have still been rising faster than incomes during the past few years. And the move by the Federal Reserve Bank to boost interest rates this year to slow the market is boosting mortgage rates and limiting the affordability of homes in Chattanooga, especially for new home buyers.
Home sales in the Chattanooga area fell in November to the lowest monthly level since the pandemic was in full force more than a year ago as rising interest rates continued to curb the volume and prices of homes sold by Chattanooga area Realtors.
The number of homes sold in the Chattanooga area last month dropped by 35.1% and pending sales declined another 27.8% below year-ago levels when mortgage rates were half as high as what they currently are.
Mortgage rates have nearly doubled from where they were a year ago, although home lending rates have declined some from their peak reached earlier this year. Last week, mortgage rates continued their buyer-friendly direction and have now dropped by three-quarters of a percentage point from the highs reached in November, but they are still up by nearly 3.75 percentage points from a year ago.
"The rise in 30-year mortgage rates has caused a significant decrease in affordability and buyer demand," Chattanooga Realtor Mark Hite said in a market summary Tuesday. "While prices have not declined, when compared to last year, the rate of increase has slowed and returned to more "normal" trends."
The median price of homes sold last month was up from a year ago, but the monthly median price of $295,000 in November was $20,000 less than the $315,000 median price for homes sold five months earlier at the peak of the price increases.
The average selling time for houses on the market in Chattanooga grew last month to 31 days as the inventory of homes on the market grew to 2,006. Earlier this year, only 759 homes were listed for sale in February and the average selling time for houses shrank to only 13 days in June, according to data compiled by the Greater Chattanooga Association of Realtors multiple listing service.
Nationwide, Fannie Mae has predicted home sales could drop by 21% next year. Fitch Ratings projects the U.S. housing market will "weaken further" in 2023 as affordability issues, softening economic environment and lower consumer confidence will erode housing demand. Redfin predicts 2023 will bring the slowest housing market in a dozen years across the country with existing home sales projected to decline by 16% year-over-year, rounding out at 4.3 million deals.
But with its diverse economic makeup and continued growth from both startup businesses and the emerging electric vehicle and battery sector, Chattanooga's residential real estate market is projected to fare much better.
Jay Robinson, whose real estate team made Robinson the top selling Realtor in Chattanooga last year, said he expects sales and prices to moderate some in 2023 due to higher mortgage rates.
"But we're going to be coming out of this much better than most of the country because of our relatively limited inventory so I think Chattanooga is going to be very resilient," Robinson said in a telephone interview Tuesday.
November home sales
The Greater Chattanooga Realtors’ multiple listing service showed residential sales last month totaled:
— 724 - Number of home sales closed in November, down 8.9% from a year ago
— 688 - Number of pending home sales in November, down 12.1% from a year ago
— 2,006 - Number of homes for sale on the market in November, up 61% from a year ago
— 31 - Average number of days homes were on the market, up 14% from a year ago
Source: Greater Chattanooga Realtors November home sales report
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340. Follow him on Twitter @DFlessner1.