Chattanooga home sales have declined in 2023 for the second consecutive year, dropping by more than 12.7% through the first 11 months of the years after higher mortgage rates priced more home buyers out of the market.
But with the local housing inventory still relatively low by historic standards, Chattanooga home prices have remained elevated, and real estate agents are hopeful the recent decline in mortgage rates may spur more market activity in the new year ahead.
Realtors completed 694 home sales last month, down 4.1% from the 724 homes sold in November 2022 and the lowest monthly total for local home sales since January, according to a new report from the Greater Chattanooga Association of Realtors.
"The last 12-18 months have been a challenge at times," said Kadi Brown, the co-owner of The Group Real Estate Brokerage and president-elect of the Chattanooga Realtors' association. "Inflation, and as a result rising mortgage interest rates, have thrown a curve ball for people looking to purchase and sell property."
Brown said mortgage rates, which rose to their highest level in more than 20 years in October, are now declining, and the recent drop in mortgage rates has caused some housing experts to say 2024 might be a return to a more predictable home buying cycle.
"No one has a crystal ball, but signs are pointing toward a possible return to normal for mortgage rates, meaning more people are looking to buy," Brown said in a year-end market report this week.
The average rate on a 30-year mortgage dipped to 6.61% from 6.67% last week. A year ago, the rate averaged 6.42%. Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, fell to 5.93% from 5.95% last week. A year ago, it averaged 5.68%, Freddie Mac said.
"Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation and a nascent rebound in the housing market," Sam Khater, Freddie Mac's chief economist, said in a report Thursday.
Jessica Lautz, deputy chief economist for the National Association of Realtors, said the drop in mortgage rates over the past two months has cut the monthly mortgage payment on a $400,000 home with a 30-year mortgage by nearly $250. Lautz said the Realtors confidence index for first-time home buyers rose from 28% to 31% in the past month and is likely to continue to improve and bring more buyers into the market.
"Home buyers who have been priced out in the last year should find optimism in 2024," Lautz said in a new Realtors' report.
Lawrence Yun, the National Association of Realtors's chief economist, told The Associated Press he has "no doubt" home sales have hit their low point in the current housing market cycle. Yun predicts home sales will begin to rise next year by 13.5% compared to 2023, and the median home price will reach $389,500 — an increase of 0.9% from this year.
"Home sales always respond to lower interest rates," Yun said.
Through November, home sales by Chattanooga Realtors in 2023 totaled 10,567, down from 11,378 in the same period of 2022.
Despite the dip in sales, home prices remained elevated as the inventory of homes on the market remained relatively low by historic standards. A decade ago, Chattanooga home sales were less than two thirds of the current sales levels and the median price for those homes sold was less than half of the current median prices, according to Realtor reports.
The Greater Chattanooga Association of Realtors said the median price of homes sold last month in Chattanooga was $303,605, up nearly 3% from the median price of $295,000 a year earlier. The typical Chattanooga home sold last month for more than twice what the average house in Chattanooga sold for just a decade ago, and even with the drop in sales, homes sold last month in Chattanooga four times faster than they did a decade earlier.
The average single-family home in Chattanooga sold last month in 35 days, or four days longer than in the same month a year earlier, according to the Chattanooga Realtors association. A decade ago, the average home on the market in Chattanooga took 124 days to sell.
Jay Robinson, a Keller Williams real estate agency owner and Chattanooga's top selling agent, said the local housing market "remained surprisingly resilient in 2023" considering the jump in interest rates and predictions of an economic recession that, at least so far, has not materialized.
"The inventory of homes on the market is up but it is still not up so much to put a downward pressure on most home prices," Robinson said. "Chattanooga remains an attractive market, and even though our prices have been going up they are still less than the national average."
The National Association of Realtors said the national median price for all housing types reached $387,600 in November, up 4% from a year ago.
First-time home buyers made up 32% of all home buyers, up from last year's historic low of 26%, but still below the average of 38% since 1981, according to the Realtors' study.
The Associated Press contributed to this report.