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Photo by Dave Flessner / A home in the Fairfax Heights subdivision is listd by Crye-Leike Realtors. The inventory of houses for sale in Chattanooga in April dropped by 26% from a year earlier.

Home sales in Chattanooga fell nearly 18% last month and the inventory of houses on the market fell by more than 26% as home-bound Chattanoogans were less likely to want to either buy or sell their homes during the worst of the coronavirus shutdowns in April.

But as the economy is reopening and the Memorial Day weekend kicks off the traditional summer season, the housing market appears to be attracting more buyers and sellers. Buoyed by historically low mortgage rates for buyers and rising home prices for sellers, local realtors expect the housing market should rebound, at least to some extent, this summer.

"In May as Tennessee and Georgia have begun to open up, we're seeing some more optimism," said Mark Hite, who heads one of Chattanooga's biggest selling real estate teams at Keller Williams Realty. "Last week, we saw 299 new listings come to market and we saw 346 homes go under contract. Inventory remains very tight, which underscores the confidence people still have in our market."

After a decade of new home construction not keeping pace with home buying demand, the available homes on the market has shrunk to only an average 49-day supply, even with the drop in home purchases.

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Home sales drop amid coronavirus

As a result, home prices continue to rise even as the economy has entered a recession this spring. Over the past five years, median home prices in Chattanooga have risen by more than 30%, although they still remain about a third less than the U.S. average, according to the National Association of Realtors.

Jay Robinson, a Chattanooga Realtor who sold more than $1 billion of real estate through his career, said Chattanooga usually had 4,000 to 6,000 homes on the market from 2010 to 2017. But available inventory has shrunk below 2,000.

"This is less than two months absorption rate in our market, but it's still a very healthy market," he said.

Robinson said the usual springtime listing and selling season has been pushed back this year due to concerns over the coronavirus and the reluctance of buyers to enter other people's homes or sellers to invite others into their houses for sale.

But with new virtual home displays and online open houses, more people are entering the market while still social distancing. Robinson said the pandemic has pushed the time frame to this summer months as the hottest time for real estate sales.

April real estate by the numbers

* $217,410 - Median home price, up 9.3% from a year earlier

* 803 - Home sales, down 17.9% form a year earlier

* 2,134 - Inventory of properties on the market, down 26.1% from a year earlier

Source: Greater Chattanooga Realtors multiple listing service

"We know that the low inventory will be a great assist in stabilizing values," he said.

Brandi Pearl Thompson, president of the Greater Chattanooga Realtors association, said the coronavirus and its economic fallout is likely to constrain the real estate market this year after last year's record home sales volume in Chattanooga.

The reversal of fortune in Chattanooga came just three months after Realtor.com projected Chattanooga would be the fourth best markets among the nation's biggest cities for U.S. home sales and price appreciation in 2020.

Hite said he expects home sales for all of 2020 to be down 15% or more.

"However, there are signs that the market may be starting to turn around," Thompson said. "The industry is adapting to the current environment by conducting business using technologies such as virtual showings and e-signing to help buyers and sellers with their housing needs in the face of these challenges."

The market is being aided by near record-low mortgage rates. Mortgage buyer Freddie Mac reported Thursday that the average rate on the 30-year loan declined to 3.24% from 3.28% last week. A year ago, the rate stood at 4.06%.

Robinson said clients are now changing their wish list for new homes.

"Being in quarantine with your family has changed how we view our homes," he said. "Our clients now want a bigger house with two home offices, a pool and other amenities that will keep their businesses functioning and their families active should we have another health challenge. The idea is to have a home that provides spacing for families to have individual places within the home. A week or two of everyone working around the dining room table was fun, but as the weeks went by, lessons were learned that will guide buying practices well into the future."

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

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