Home sales quickened and prices rose to record highs last month in Chattanooga as the local housing market remained active despite rising interest rates and economic concerns.
The median price of homes sold by Chattanooga Realtors in June rose to a record-high $328,725, up 19.5% from a year ago. The Greater Chattanooga Association of Realtors said the typical home sold last month in 13 days - the shortest period on record.
Higher mortgage rates do appear to be affecting the market, however. The association said homes sales closed last month were down 4.7% from a year ago to 1,144, and pending sales also fell in June by 2.4% to 1,089.
Higher home prices also are encouraging more homeowners to put properties on the market, helping boost the inventory of houses for sale last month to more than double the number for sale at the start of the year and nearly a third higher than the number of homes on the market a year ago, according to the association.
(READ MORE: Home sales, prices rise in Chattanooga despite slowdown elsewhere)
"What you're seeing with the historically low number of days on the market are houses that are priced attractively and hit the current market and sell very quickly," Mark Hite at Real Estate Partners, one of Chattanooga's top-selling real estate agents, said in a phone interview. "What you are not seeing yet in that number (13 days to sell an average house) are all the listings that are out there now and haven't yet closed to enter into the average because they've never gone under contract."
Hite and others expect a slowdown this year, at least in the rate of increase in home prices if not an actual decline, as the market adjusts to the effect from higher mortgage rates on top of already higher home prices. Hite said higher prices have encouraged more people to list their properties, but the price and interest rate hikes are making it harder to get full listing value, in some instances.
(READ MORE: Chattanooga's median home price tops $300,000 for the first time)
Rising mortgage rates and home prices have combined to push up housing prices beyond the reach of many first-time buyers, and home sales, even in stronger markets like Chattanooga, are expected to slow during the rest of 2022, according to real estate experts.
"Across the nation, monthly mortgage payments are up more than 50% compared to last year, and this increase in rising costs of homeownership means that there are many sidelined prospective buyers," Derek English, an associate broker for Scout Real Estate and president of the Greater Chattanooga Realtors, said in a monthly report on June real estate sales. "Higher prices and 30-year fixed mortgage rates approaching 6% have exacerbated affordability challenges and rapidly cooled demand, with home sales and mortgage applications falling sharply from a year ago."
By the numbers
In June, the Greater Chattanooga Realtors reported:— $328,725 — The median price of homes sold in Chattanooga, up 19.7% from a year ago.— 1,638 — Inventory of homes listed for sale, up 31.9% from a year ago— 1,144 — Sales of single-family homes closed in June, down 4.7% from a year go>— 1,089 — Pending home sales in June, down 2.4% from a year ago.Source: Greater Chattanooga Association of Realtors
English and other real estate agents said Chattanooga is faring better than the national housing market, in part, because its relatively lower costs are drawing more incoming residents leaving higher-priced markets in an era of more remote work and more retirements. Chattanooga also is benefiting from more inventory coming on the market, which jumped in June to 1,638 units, the highest since before the pandemic. Such increases are typical in the summer months, however.
"Falling housing affordability continues to take a toll on potential homebuyers," Lawrence Yun, chief economist for the National Association of Realtors, said in a report last week on June home sales. "Both mortgage rates and home prices have risen too sharply in a short span of time."
But local homebuilders said the market appears to be faring better in Chattanooga.
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"There's definitely a slowing in the market, but we've been in an abnormal market for the last two years," Jay Bell, president of Bell Development Co., one of the biggest homebuilders in Chattanooga, said in a phone interview. "I think we're returning now to a more normal market, and I think we'll continue to do better in Chattanooga than in most of the country."
Nationwide, existing-home sales dropped for the fifth straight month in June, according to the National Association of Realtors.
In a separate report released Tuesday, the U.S. Census Bureau said sales of new singlefamily houses in June 2022 were at a seasonally adjusted annual rate of 590,000, or 8.1% below the revised May rate of 642,000 and 17.4% below the June 2021 estimate of 714,000.
Although Chattanooga's median home price jumped 19.7% in the past year to the June median price of $378,725, Chattanooga homes prices remained 22.3% below the U.S. median price of $423,300, according to the National Association of Realtors.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340. Follow him on Twitter at @dflessner1.