Will Rogers and his wife, Lilly, moved to the Chattanooga area from Knoxville after Rogers finished law school last summer. Like many other young couples, they immediately began looking for their first home.
Ideally, their first home would have a yard for their dogs, covered parking and a walkable neighborhood close to downtown. The reality of finding that home in Chattanooga was more difficult than they imagined.
The Rogers, like many other prospective home buyers, quickly realized they were shopping in a seller's market, a housing market where demand far exceeds supply. They were under contract with two homes that eventually fell through before beating out nine other prospective buyers for a third home in the Southside. They ended up paying $315,000 for a three-bedroom, two-bathroom home off Read Avenue.
"This house came on the market and we knew we needed to be as competitive as we could," says Rogers, who used Mark Hite's team at Keller Williams Realty to buy his home.
"Our Realtor said we had to go up or we would likely lose it," the 26-year-old added. "We ended up going $16,000 over list price originally and then the appraisal came down at list price, which led to a negotiation with the sellers until we reached a happy medium."
Just four years ago, there were over 5,100 active homes listed for sale in the Chattanooga metro area, which includes Hamilton, Marion and Sequatchie counties in Tennessee and Catoosa, Dade and Walker counties in Georgia, according to the multiple listing service of the Greater Chattanooga Realtors (GCAR). So far in 2018, there has been an average of half that number available.
In 2014, homes spent an average of 109 days on the market compared to just 44 days on the market in June.
Despite some of the hurdles the Rogers had to jump through, they were lucky compared to some potential home buyers. Geoff Ramsey, president of Greater Chattanooga Realtors who is a licensed broker for RE/MAX Properties, said he had a buyer earlier this year who looked at 50 houses and made offers on six or seven before closing on one.
"I don't recall seeing inventory this low in a very long time," says Ramsey. "I don't believe that people are just not selling. I think that we have more buyers."
The "sellers-market" trend is national, according to the National Association of Realtors. Population and job growth and rising construction costs are a few reasons why inventory is tight.
Robert Dietz, chief economist at the National Association of Home Builders, said lumber prices have increased by about 25 percent in the past year with a labor shortage in the residential construction industry, as well.
In the Chattanooga metro area, Builders.com reports employment growth was highest in the construction field from Feb. 2017 to Feb. 2018 at 4.2 percent. Census Bureau population estimates show the number of residents in the metro area has steadily grown from 529,220 in 2010 to 547,776 in 2017.
"It has been really frustrating for some buyers, and some buyers just give up and rent something because they get into multiple offer situations," Ramsey says. "A lot of them (buyers) have to experience being outbid a few times before they realize it is a seller's market."
Sellers shouldn't get too overconfident, though. Ramsey said he is seeing a trend of bidding wars that boost the price of a house way up and then the appraisal knocks it back down if there is a loan involved.
"I advise my sellers when they get into these bidding wars to figure out what their house is actually worth," he says. "When somebody is offering you $25,000 over list price it's probably not going to appraise for that."
Across the Chattanooga metro area, the median sales price in 2010 was $128,000 when there were more than 6,100 homes for sale — a $73,000 difference from June's median sales price of $201,000 with only 2,700 homes for sale.
In 2010, Chattanooga's downtown had a population of 12,974 residents, and River City Company officials anticipate the number of residents will grow by 54 percent, or to 19,980 downtown residents, by 2020, according to a survey done by Noell Consulting Group. River City, a private nonprofit, works with officials and developers to support downtown.
Amy Donahue, director of marketing and communication for River City, said much of the focus has been on growing rental units downtown, although for-sale product is starting to become more available in the city's urban core.
"Land and building resources are a finite resource in downtown — we have to be really smart on development," she says. "What we don't want as a city is too much of a certain type of housing. You want to have a balance."
Another housing challenge for downtown is that the popularity and uniqueness of the area can also ratchet up the price. Exchange Cameron Harbor, a two-building condo development with a total of 112 units along the riverfront, aims to provide a more affordable option but is in high demand.
In less than one month, 41 condominiums at Exchange Cameron Harbor were reserved and are now entering the contract phase, according to Darlene Brown, who is president of Real Estate Partners Chattanooga LLC.
Exchange Cameron Harbor has a price point ranging from $159,000 for studios to $375,000 for two bedroom/two bath condominiums. The smaller, south building at Exchange allows for short-term vacation rentals. As of mid-July, 26 of the 30 units in the south building were under reservation.
"We have not had a new condominiums development downtown for several years and this response speaks loudly about the need for downtown ownership opportunities at more affordable price points," Brown says.
GCAR figures show that as of June 2018, listings were down 23.3 percent from June 2017.
"Listings are the life blood of any housing market and in Chattanooga we are in need of a transfusion," Brown says.
Brown's son Ryan May, the business resource and development director for the independent real estate company, is helping Brown sell and market the condos at Exchange Cameron Harbor. May said agents are working with qualified buyers who still cannot find a home. He said that homes on the market in every area of the city and at every price point are getting multiple offers immediately.
"When our average sales price is $238,413 and first available price category with any inventory is in the $300,000 to $399,000 range, it is pretty clear why the few available homes are moving so quickly and for top dollar," May says. "It is a very strong seller's market."
The outlook for home buyers is improving, though. In the first six months of 2018, the number of homes available for sale has increased. In January, there were 2,446 homes for sale and 942 new homes listed that month. In June, there were 2,756 homes for sale and 1,388 new homes listed.
Ramsey thinks the market will see balance again in the near future.
"I think that the low inventory will start climbing back up by the end of this year," he says. "Certainly in 2019 as those interest rates go up a bit."
Contact staff writer Allison Shirk at firstname.lastname@example.org, @Allison_Shirk or 423-757-6651.