Home prices and sales rose to record highs in Chattanooga last year as more people moved into the area and buyers tried to stay ahead of expected higher interest rates and even higher home prices in the future.
The typical, or median-priced home, sold in 2021 in Chattanooga for $265,000, or 15.2% more than the previous year.
(READ MORE: Chattanooga home sales, prices rise to record highs amid pandemic)
The average home sold in only 22 days, or about half the time it took to sell a home in 2020 and less than a third of the time it took a decade ago.
"Chattanooga is poised as the kind of mid-sized city that a lot of people are moving to and they are looking for the low cost of living and fast internet services that we have in Chattanooga," said Derek English, an associate broker for Scout Realtors Group and president of the Greater Chattanooga Realtors Association. "There are a lot of people gravitating to our state, and I feel like Chattanooga is capitalizing on that migration. It's an easy city to sell because we know this is called the Scenic City for a reason."
With more homebuyers, the inventory of homes on the market has dropped this month to all-time lows, creating a rush to buy well-priced homes, English said. Last year, the average home sold for 99% of its original listed price.
Chattanooga real estate by the numbers last year
$265,000 — Median home price in 2021, up 15.2% from the previous year22 days — Average selling time for a house on the market, 49% quicker than the previous year99% — The share of the original offering price paid by buyers, up from 97.3% the previous year12,806 — Number of closed sales by Realtors, up 9.9% from the previous year903 — Inventory of homes for sale at year end, down 36.2% from the previous yearSource: Greater Chattanooga Realtors
English said rising interest rates will limit the affordability of housing, especially for new homebuyers. But the increases are also spurring more buyers to expedite their moves to get ahead of even higher rates expected later in the year.
Jay Robinson, a Keller Williams Realty broker who was Chattanooga's top-selling real estate agent again last year, also said sales in 2021 were fueled by historically low interest rates and the migration into the Chattanooga area.
"There are more buyers than sellers today, but I think as the Federal Reserve begins to raise interest rates we're going to see a tightening of the market," Robinson said. "But with our market as tight as it is today in Chattanooga, it's going to take a while for the market to adjust, even if rates go up this year."
Last week, the number of homes for sale in Hamilton County dropped at one point below 280 houses, or less than 15% as many listings as Realtors have historically had on the market, Robinson said.
(READ MORE: Chattanooga area home sales quicken as demand leads to fewer homes on the market)
Homebuilders nationwide increased the number of houses built in 2021 by 15.6%, according to the U.S. Department of Commerce, but the housing stock still trails the demand in many markets.
"Demand exceeds supply, and builders are working as hard as they can to catch up, a process that was always going to be measured in years, not months, after the massive shift in demand toward single-family homes sparked by the pandemic," said Stephen Stanley, chief economist for Amherst Pierpont.
Lawrence Yun, chief economist for the National Association of Realtors, told The Associated Press earlier this month that the market will continue to favor sellers in the immediate future. First-time buyers, already facing challenges breaking into the market, will struggle as both interest rates and prices continue to rise, Yun said.
"Rising home prices have hindered affordability, but now rising interest rates are another thing that will begin to shave off some of the demand potential from first-time buyers," said Yun, who predicts home sales will drop about 2% this year as a result of the higher prices and mortgage rates.
In Chattanooga, the average price of single-family homes sold last year in Chattanooga rose 15.8% to $307,984. The average price represents the total value of all residential sales divided by the number of those sales and is typically a bit higher than the median home price, which is the mid-point for all home sales.
The higher prices encouraged more listings for Realtors. In 2021, 14,338 properties were listed through the Realtors' multiple listing service, or 7.7% more than the previous year.
"You have to go back to 2007 to find a year where more properties came to market,"said Mark Hite, a top-selling agent with Real Estate Partners of Chattanooga. "While the median price did increase at an unsustainable 15% increase, this helped move sellers from the sidelines to the market."
Hite said the increase in home prices was still largely offset by low interest rates.
"While we saw affordability decline, buyers still viewed purchasing their home as a good investment, particularly as rental rates rose at the same or higher pace," he said. "Looking forward, while we may have a temporary blip with the current COVID variant, buyers should return in force for the first half of the year. If interest rates begin to rise as predicted, we have a totally different sales story for the second half of the year."
Linda Brock, one of the region's top-selling real estate agents of luxury homes, said Chattanooga should remain "strong and steady" due, in part, to its appeal to more workers who have shifted to remote locations and can now work and live where they choose.
Chattanooga’s top-selling agents
In 2021, the top-selling Realtors in the Chattanooga area were:1. Jay Robinson of Keller Williams Realty, 316 sides with a total sales volume of $169.2 million2. Grace Edrington of Berkshire Hathaway HomeServices J. Douglas Properties, 505 sides with a total sales volume of $150.2 million3. Mark Hite of Real Estate Partners Chattanooga, 476.5 sides with a total sales volume of $109.4 million4. Jake Kellerhals of Keller Williams Realty, 329.5 sides with a total sales volume of $102.1 million5. Linda B. Brock of Real Estate Partners of Chattanooga, 132 sides with a total sales volume of $99.8 millionSource: Greater Chattanooga Association multiple listing service. Sides include Realtor representation for either the buyer or the seller in the property sale.
(READ MORE: Leaderboard: Top-selling Chattanooga real estate agents in 2020)
"Chattanooga was discovered during COVID as people went home to work," she said. "If I am working from home, why not go to a place the internet is the strongest and fastest in the world and capture a no-state-income-tax income."
Despite prospects of higher mortgage rates this year, Brock said Chattanooga's real estate market has not had the volatility of many other markets through the pandemic and interest rate and economic swings in the past.
"What separates Chattanooga from the larger metropolitan cities is that we never had a boom so we never had a bust, even during 2008-2012 as so much of the country, likely because of VW's presence (announced in 2008 and began car production in 2011) coming to Chattanooga," Brock said. "Also, at least in the higher end or 'luxury' market, Chattanooga's market never actualized its values until now. The high-end market in Chattanooga historically has always been the best value in the city, likely in the entire country until now."
Home prices rose across the Chattanooga region, but residential prices remained the highest in the mountaintop municipalities. The median sales price of homes sold last year on Lookout Mountain rose 23.5% to $740,000 while the median price of homes sold on Signal Mountain increased by 14.5% to $475,000.
In the region, home prices remained the cheapest in rural areas. Despite an 18.5% increase in median home prices in Chattanooga County last year, homes in and around Summerville sold at a median price of $149,250, or only about half the median price across the rest of the Chattanooga region.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.