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Home sales in Chattanooga rebounded last month after January sales fell below year-ago levels for the first time in five years.

Chattanooga Realtors sold 642 homes during February, up 8.6 percent from a year ago. Last month's gains reversed January's drop in sales and left home sales up 2 percent for the first couple of months of 2017.

The median price of homes sold last month through the Greater Chattanooga Association of Realtors also rose by 6.7 percent over a year ago to $163,000.

Chattanooga home prices, on average are still more than 23 percent below the U.S. average. But rising prices and the likelihood of rising mortgage rates should encourage both homebuyers and homesellers to get in the market.

"These are amazing increases in prices," said Mark Hite, a Realtor with Keller Williams and president of the Greater Chattanooga Association of Realtors. "This will eventually become a drag on the market, but for now we're still plowing ahead with higher sales and higher prices."

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Such gains are coming at a cost for homebuyers, however. The inventory of homes on the market is down by more than 23 percent from a year ago to only 2,967 homes, or a 3.6-month supply in Chattanooga. The number of new listings on the market in February was down 15 percent from a year ago, cutting the inventory of homes to only half as many as two years ago.

"If you are thinking of buying, you need to move now before interest rates go up," Hite said. "If you are thinking about selling your house, this also is a good time because the supply of homes on the market."

John Thornton, owner of Thunder Enterprises which is developing more than 3,000 acres atop Jasper Mountain in Marion County, said the tight inventory is encouraging more homebuilders to construct new houses.

"The economy and consumer confidence, from what I see, seems to be great right now and home building is way up," Thornton said. "Chattanooga Realtors who visited with us last week kept telling us they are running out of inventory. I told them we will eventually have a couple thousand home sites here [in Jasper Highlands] so we think we can help meet that demand."

Although home sales jumped by more than 13 percent in Chattanooga from January to February, home sales slowed nationwide. The National Association of Realtors said Wednesday that home sales retreated by 3.7 percent last month from the strong start at the beginning of 2017.

Lawrence Yun, chief economist for the National Association of Realtors, said tighter inventories are limiting sales in many markets.

"Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that's pushing up price growth and pressuring the budgets of prospective buyers," Yun said in his monthly NAR report released Wednesday. "Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market."

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

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