In a year beset with a pandemic, tornadoes and civil unrest, one bright spot that emerged in 2020 was a residential real estate market that enjoyed record-high sales and home prices in Chattanooga.
Buoyed by historically low mortgage rates and an increased focus on home life during the pandemic, Chattanooga home sales rose 8.4% during 2020, even as median home prices jumped by more than 13% to a record high of $230,000. Despite the economic slowdown and employment drop triggered by the pandemic, Chattanooga Realtors boosted home sales in nearly all areas of the city, according to new data compiled by the Greater Chattanooga Association of Realtors.
Although the pandemic temporarily slowed housing sales and starts last spring, Realtors ended 2020 selling 904 more single-family houses than the previous record high set in 2019. Homes sold at the quickest pace in modern history last year, with the typical house selling in Chattanooga in just 43 days — 10.4% quicker than the previous year and twice as fast as six years ago.
"Interest rates remain near their all-time lows and, as a result, we're seeing many people now whose buying power has increased $50,000 to $100,000 on what they can afford to pay for a house," said Robert Backer, a local real estate agent with Coldwell Banker Pryor Realty Inc. and the 2021 president of the Greater Chattanooga Association of Realtors.
Chattanooga home sales
The number of single-family homes sold by Chattanooga Realtors rose nearly 8.4% last year to a record high, nearly double the sales of a decade earlier.
2020 - 11,680
2019 - 10,776
2018 - 10,042
2017 - 9,827
2016 - 9,672
2015 - 8,717
2014 - 7,827
2013 - 7,634
2012 - 7,038
2011 - 5,996
2010 - 5,778
2009 - 5,596
2008 - 5,990
2007 - 7,024
2006 - 7,870
Source: Greater Chattanooga Realtors association multiple listing service
Mortgage rates fell to an all-time low during 2020 and began the new year with the average rate for a 30-year mortgage falling to 2.65% during the week ending Jan. 7, according to a survey by the government-sponsored mortgage finance company Freddie Mac. The average rate for a 15-year mortgage fell to 2.16% in the first week of the year.
"It's the first time in my 32-year career in this business that we are in both a seller's market and a buyer's market," said Jay Robinson, a Keller Williams Realtor who was involved in a record $146.1 million of residential home sales last year. "It's a seller's market because inventory is low and demand is high as more people are focused on their home and its amenities, as they are spending more time at home and likely working from home these days. But it's also a buyer's market because mortgage affordability is at a historic low."
That has created a shortage of homes on the market for sale, Realtors said. Fewer than 1,000 single-family properties were listed this week in the Chattanooga area multiple listing service, or less than a third of the number of homes on the market a decade ago when buying demand was even less. With nearly 2,200 licensed Realtors in the Chattanooga area trying to represent buyers or sellers for those homes, the competition for listings and speed of home sales has never been greater.
"There's a real inventory crunch now with not enough homes for sale, so that continues to drive prices up and makes sales times much quicker," said Doug Edrington, CEO at Berkshire Hathaway HomeServices J Douglas Properties in Chattanooga, which helped sell or buy a record-high 460 houses during 2020. "We've had to be very creative in generating interest in selling homes and working with our clients in this extraordinary market."
Edrington said home sales are being pushed up by rental rates for apartments in Chattanooga, which rose by an average of 14.5% over the past year, according to Zumper's newest National Rent report. The average rent for a one-bedroom apartment in Chattanooga rose 14.4% over the past year to $1,030, while the average rent for a two-bedroom apartment in Chattanooga jumped 14.6% in the past 12 months to $1,180.
"For many families, it's less expensive on a monthly basis to own a home than to rent right now," Edrington said. "When you add the challenges of the COVID-19 virus on that with more people wanting more space and distance from other people, owning a home is now making a lot of sense for people who have been renters."
Median sales price
The median sales price of single-family homes sold by Chattanooga Realtors rose nearly 13.3% last year to a record high of $230,000.
2020 - $230,000.
2019 - $203,085
2018 - $187,000
2017 - $175,000
2016 - $161,000
2015 - $152,000
2014 - $142,000
2013 - $134,900
2012 - $131,500
2011 - $124,000
2010 - $129,900
2009 - $130,000
2008 - $139,000
2007 - $139,900
2006 - $137,000
Source: Greater Chattanooga Realtors association multiple listing service
Chattanooga is also benefiting by more people relocating to the Scenic City to take advantage of its high-speed internet for remote work and its outdoor amenities and relatively low cost of living compared with most major U.S. cities.
"People are choosing to come to Chattanooga," said Linda Brock of Linda Brock Homes, who has sold or bought more than $973 million in homes during her 26 years as a local Realtor. "People want to escape densely populated areas and they want to be in an area where they can actualize outdoor recreation and elevate their entertainment and improve their quality of life. You combine the appeal of Chattanooga with these record-low interest rates and Chattanooga just had an incredible year for home sales. And I think it will continue."
Brock said the number of homes selling for more than $1 million in Hamilton County jumped from the previous record high of 49 in 2019 to a new record 75 last year.
"What drove the market after March was a flight back inside," Robinson said. "People who were stuck at home in March and April decided that they wanted more space and amenities in their home. More people wanted a swimming pool, a tennis court, a house on the lake or at least a bigger house for more workspace when they are having to work at home."
The strong housing market is expected to boost new housing starts, but land, labor and building supply challenges in 2020 limited the number of new homes started in the Chattanooga area. According to the online real estate website MarketEdge.com, the number of new single-family homes started in the first nine months of 2020 fell by 8% from the previous year in the five-county region in and around Chattanooga, Cleveland and Dalton, Georgia. MarketEdge reported 1,772 new homes were started in the first three quarters of last year in the Chattanooga region, or 146 fewer than in the same period in 2019.
Jay Bell, president of Bell Development Co., and a former president of the Home Builders Association of Greater Chattanooga, said his company started about the same number of homes in both 2020 and 2019. But he said adding new housing in Chattanooga is getting more difficult with fewer open lots available for home construction in the hilly terrain of the region, especially with new steep slopes and stormwater regulations.
At the same time, COVID-19-related production problems last spring limited supplies of lumber and other building materials and COVID-19 restrictions are also slowing some construction work as crews remain socially distanced from one another. The National Association of Home Builders said lumber prices more than doubled after the pandemic and the imposition of some tariffs on Canada last year.
"The challenges we face to get land and developed lots that we can build on have only increased in the past few years," Bell said. "Our ability to meet the demand is still restrained by regulation, access to utilities and even some building supplies."
Despite such challenges, many experts are predicting another strong housing market in 2021 from buyers who delayed purchasing homes because of the pandemic, from existing homeowners who need larger spaces to accommodate parents working from home and children attending school virtually and from condo owners who are seeking to escape multifamily buildings for single-family houses to mitigate exposure to the virus. As vaccinations rise and the virus fades, the ability to tour homes and close on purchases virtually could also make buying a home simpler this year.
The National Association of Realtors expects the market to remain strong in 2021.
"One astonishing development from 2020 has been the hot housing market as consumers eyed record-low mortgage rates and reconsidered what a home should be in a new economy with flexible work-from-home schedules," said Lawrence Yun, chief economist for the National Association of Realtors.
Yun predicts there will be a slight upward rise in mortgage rates to around 3% from the current 2.7% rate. Existing-home sales are expected to increase by roughly 10% and new home sales by 20% in 2021.
"Economic growth is guaranteed from the stimulus package and from vaccine distribution, but high government borrowing will put modest upward pressure on interest rates," he said.
Contact Dave Flessner at email@example.com or 423-757-6340.