When Darlene Brown moved into the former Chattanooga Bank building and began trying to market residential condos in the former Loveman's department store across Market Street downtown in 2001, the Chattanooga Realtor recalls most people were skeptical about living in the central city.
But two decades later, downtown has again emerged as one of the region's biggest housing attractions even as new suburban subdivisions continue to sprout in Ooltewah, East Brainerd and Hixson.
"It's evolved from people laughing at us and saying 'no one will live downtown,' to where people complained that they couldn't afford to live downtown, to now where there are more options so people can live in or near downtown," Brown says.
River City Co., the downtown development agency, counts more than 3,000 apartment units, nearly 2,000 student beds, and over 250 condominiums and townhomes recently opened or coming online within the next year in and around the central city. After decades of moving out of the central city during the 1960s, '70s and '80s, Brown said more homebuyers are choosing a more urban life to be close to downtown amenities and shorten their daily commute to work.
Record home sales
The number of single-family homes sold each year by Chattanooga area Realtors has nearly doubled in the past decade while the median price has risen nearly 45%:
2018 - 10,009 with median price of $187,000
2017 — 9,826 with median price of $175,000
2016 — 9,670 with median price of $161,000
2015 — 8,764 with median price of $151,950
2014 — 7,832 with median price of $141,950
2013 — 7,634 with median price of $134,900
2012 — 7,038 with median price of $137,000
2011 — 5,996 with median price of $128,000
2010 - 5,929 with medial price of $128,000
2009 - 5,722 with median price of $130,000
Source: Greater Chattanooga Realtors
"The biggest drive for millennial home buyers is commute time, not square footage," says Kim Bass, a Realtor with The Group Real Estate Brokerage in Chattanooga and the 2019 president of the Chattanooga Realtors association.
But after adding thousands of new housing units downtown in the past decade, developer John Wise, one of the early pioneers of building downtown apartments, worries that the market may have become saturated. "The party is over," Wise says about developers tapping into Chattanooga's downtown appeal, at least for now.
But more condos, homes and apartments are still being added in the nearby communities to downtown, including Main Street, Highland Park, St. Elmo and North Chattanooga. The abundance of downtown apartments also is making some units more affordable as apartment owners compete for tenants with rental discounts and tenant incentives.
Across the entire Chattanooga region, developers are adding more new housing to keep pace with growing demand. Sales of single-family homes by Chattanooga Realtors have nearly doubled from the sluggish pace during the Great Recession a decade ago even as median home prices have grown an average of nearly 45%.
With a growing economy and favorable interest rates, home sales are on pace for another record year in 2019 with closed sales in the first half of the year rising another 2.7% above the 2018 record year to 5,129 homes. In June 2019, the median home price in Chattanooga was $215,000.
Bass said Chattanooga remains an affordable market and lower mortgage rates are making home purchases less expensive, which is key for the one-third of buyers who are buying their first home. According to the National Association of Realtors, the median home price in the Chattanooga area is nearly 30% below the U.S. average.
"Home prices are going up and it is getting more difficult for some first-time homebuyers," Bass says. "But people who move to Chattanooga are often surprised at our pricing and overall, not just in housing, we are a more affordable place to live."
The Great Recession a decade ago flushed many home builders out of the market and those that remained often find getting financing for new developments is not as easy as it was as before the recession. Additionally, building land is less available than in the past in Chattanooga where steep slopes, low-lying floodplains and inadequate sewers prevent building in many areas. What is available therefore has become more expensive and home prices have risen faster than most people's incomes over the past decade.
But with the inventory and selling times for homes on the local market near historic lows in recent years and Chattanooga' employment growth outpacing the national average, home builders are responding to the market with more new building, both in new subdivisions and on vacant lots throughout the city.
"Anywhere that developers can get some decent land in Ooltewah, Hixson, Soddy-Daisy and other areas, housing is going up," Bass says. "There is a lot of new construction going on and that should soon start coming to the market and get us in better balance, but we have been way behind the demand for years."
From the depths of the Great Recession a decade ago, home starts in the Chattanooga area have more than doubled, according to residential building permits granted in the Chattanooga area.
"We're having an extremely good sales year and we expect that to continue," Bass says.
Home starts grow
The number of residential building permits issued for new single-family homes each year in the 5-county Chattanooga region has more than doubled since 2010.
2018 - 2,732
2017 - 2,271
2016 - 2,247
2015 - 1,785
2014 - 1,505
2013 - 1,731
2012 - 1,481
2011 - 1,142
2010 - 1,186
Source: The Market Edge compilation of residential building permits in Hamilton and Bradley counties in Tennessee and Catoosa, Walker and Whitfield counties in Georgia