Residential real estate professionals in the Chattanooga area acknowledge that the market has been affected by the recent turbulence experienced nationwide. The perfect storm of declining sales, eroding property values, escalating foreclosure rates, and financing constraints has battered the mortgage industry and sent investors scurrying for shelter as evidenced by the recent sub-prime crisis.
However, the good news for residents of the Chattanooga area, buyers, sellers, and homeowners, is that the local residential real estate market remains solid. In fact, while the impact of the recent slump has been felt locally in sales volume, pricing, and product inventory, homes continue to be bought, sold, and constructed here. Additionally, history shows that the Chattanooga market typically, has not experienced the large swings in homes sales or home values seen in other markets throughout the US.
“I think the market is getting better and that we are going to have a good spring and summer,” reasoned Vickie Trapp, managing broker for the downtown office of Crye-Leike Realtors. “Since the beginning of 2008, figures have continued to improve, and 2007 was the third best year in the history of the Chattanooga Association of Realtors in terms of reported sales, even though it was a down year for most of the country.”
Along with other real estate professionals, Trapp points to statistics which do indicate some softening in activity, but which also show that unit sales and home value declines in Chattanooga are not the same as national trends and the depths of the decline may have already been sounded. The Chattanooga Association of Realtors Multiple Listing Service, Southeast Tennessee and Northwest Georgia, recently reported that in February 2008 there were 489 home sales at a median price of $138,688. This represented a 15 % decline in sales and a 1% decline in home value versus a year ago. Nationally, home sales declined 24 % and the median home price declined 8% versus the same time a year ago.
On a more positive note, home sales for February 2008 in the Chattanooga area were 25% higher than January 2008 and the median value of homes sold in February was 9% higher than in January 2008. Nationally, home sales in February increased 2.9% and the median home value slipped 3% versus January.
Collectively all of this reinforces that the declines experienced in Chattanooga are less severe than national trends and the short-term outlook appears bright for upcoming spring and summer months. Analysts are yet to pronounce an end to the uncertainty, but reasons for optimism remain. Interest rates are attractive. Increased lending limits for FHA and other government sponsored loan programs are being explored, and the Federal Reserve has provided cash to lenders to alleviate the symptoms of the current credit crunch.
“The national overview provides a somewhat pessimistic or derogatory outlook,” commented Tim McClure, president of the Home Builders Association of Southern Tennessee, “but I don’t think it has been nearly as bad in the Chattanooga area as in some other places.” With regard to new construction, McClure has observed some higher inventory levels, most notably in the East Brainerd and Ooltewah areas; however, he looks forward to a continuing resurgence in sales. “We probably have a little more housing available than we normally have had in the past,” he added, “but I have sold five houses in the last 30 days, all ranging in price from $375,000 to $425,000, and there are other people selling houses too. I foresee a major turnaround by the end of the summer, and really we are already seeing it. New homes are being built in the $150,000 to $200,000 range, and people are also buying those.”
Realtor Paula McDaniel of Prudential RealtyCenter agrees that home sales have slowed in the Chattanooga area but to a lesser extent than the nationwide slump. “I definitely think we have taken a hit, but it has not been as dramatic as in Florida, California, and other parts of the country,” she remarked. “I do think sales have been down and that the price range from $350,000 to $700,000 has slowed the most, but I have seen people building custom homes when they can’t find exactly what they are looking for in an existing home. Right now this is definitely a buyer’s market, but sellers should make up for any decline in the sale price of their home when they are on the buying side.”
“Historically, Chattanooga has never experienced the peaks and valleys you see in national trends,” related Chris Varnell, a vice president with Cohutta Banking Company of Tennessee and a 30-year veteran of local residential and commercial real estate lending. “When things are really flying high, we don’t experience those highs, but conversely, when the markets are down, we have generally not been as down as the national averages. So, we have been somewhat insulated,” Varnell explained. “Based on a recent conversation with a developer, I would say that activity continues to be relatively good in certain price points that would be considered more affordable, and basically that would be $200,000 and below. I think the turnaround will come in 2009 because there will be absorption in the market, and supply and demand will come back into balance.”
Many observers conclude that the ebb and flow of the real estate market is cyclical, natural, and, in fact, essential to its long-term health. Individuals considering a home sale or purchase can help themselves by doing research, evaluating their options, and realizing that in the wake of the mortgage crisis certain essential components of a real estate transaction are more important now than in the recent past.
“There is plenty of product out there,” noted Trapp. “The challenge for home buyers is that they have got to have good credit and money for a downpayment. First time home buyers don’t always have the money they need for a downpayment, but more people can now use FHA and possibly go with as little as three percent down. FHA is also good for those that don’t have perfect credit,” he advised.
Despite recent events and continuing concern for the overall health of the real estate industry, the message from the local marketplace is one of optimism. Buyers and sellers come together consistently, and the prospects for more vigorous activity in the coming months remain strong.
Sources: The Chattanooga Association of Realtors Multiple Listing Service, Southeast Tennessee and Northwest Georgia; MSNBC.com