KNOXVILLE, Tenn. (WATE) — Home builders are busy in East Tennessee as the demand for new houses remains high. Additionally, the need for affordable housing is greater than the supply and prices for new homes are not likely to drop substantially in the near future.
Existing home sales have slowed this year when compared to the boom years of 2019 through 2021. The experts say higher interest rates, used to slow the country’s inflation rate, have affected the housing market in a number of ways.
Wallace Real Estate Chief Operating Officer Claudia Stallings compared active listings for the first nine months of 2022 vs 2023.
“What we have here are the number of listings that have flowed through the market for the first three quarters of this year vs the first three quarters of last year. We are actually down eight percent,” said Stallings.
“Buyers actually have fewer choices, fewer homes are flowing through the market,” she added, stating that demand is still high.
The price for existing homes is holding steady and up from last year. The median price point is around $335,000 for the first nine months of 2023 compared to $320,000 in 2022.
“The number of new listings we have seen go down 16 percent,” said Stallings. “A lot of that is the result of what we call the lock-in effect, where current homeowners have a very low interest rate. It’s very hard for them to put their home on the market and think about buying in today’s high-interest rate environment.”
A typical home in East Tennessee sells within 30 days, compared to 111 days during the big slowdown of the Great Recession of 2008 and 2009. Stallings added that the number of pending sales under contract has gone down.
“The number under contract has also gone down 13%. A lot of that has to do with high prices, high interest rates, the time of year, we also have to factor that in. Home sales happen in a bell curve shape. Most sales happen in warmer months,” she said. “But I do think that because prices are stable sellers will still be able to get what they need out of their property.”
When asked what the future looks like, Stallings predicted that interest rate increases will slow down.
“I do think that the interest rate increase will slow down. My hope is that we will settle into a sales rate that will start to increase,” she said. “Our country needs 5 million homes right now, just to meet demand. In order for that to be affordable, people have to have a reasonable interest rate.”
The Federal National Mortgage Association’s, known as Fannie Mae, interest rate forecast calls for 30-year rates to dip to 7.3 percent by the end of this year and to drop 6.7 percent by the end of 2024. With lending standards much stricter now than they were before the Great Recession, and with low inventory and high demand both continuing, experts predict that the housing market is not likely to enter a recession in 2024.
The issue is primarily an affordability crisis. High interest rates of the last two years and inflated home values have made purchasing a home challenging, especially for first-time home buyers.