Market Update – November, 2013
By Gary J Venice
November 9, 2013
Welcome to our opinion of our Regional Market Analysis of East Tennessee Real Estate for October, 2013 which looks at and reports on the East Tennessee Real Estate Market. I will be sending this report and updating the Blog routinely with information that I think may be useful to you as another tool to help in your ongoing real estate plans and management.
If this is your first review of this report, our market region is broken up into three components, a north region, an east region and a west region. The east and west regions are divided by the Tennessee River.
The North region generally takes in all of Roane County as well as some of south Anderson and a portion of Loudon County.
The West region encompasses all of Rhea County, areas of North Hamilton, Eastern Bledsoe and East Cumberland Counties.
The East region covers all of Meigs County as well as a small part of North Hamilton (on the east side of the river) and extreme Western McMinn County.
The market for our region shows a continued trend of improvement over the last nine months. Buyers continue to return to the market in our region, we think due in part to the fact that this area continues to demonstrate its ability to hold its own as compared to the national market stand point; and with interest rates at historic lows, the value here is just compounded. We also believe that the foreclosure and short sale market here are at or past there peak and have begun to retract and we expect that to continue here through the end of 2013.
The rate for an average 30 year fixed conventional loan is 4.42 %, a 15 year fixed is 3.50%. A jumbo 30 is at 4.28% and an FHA 30 is at 4.15%. All of these rates are near historical lows. In addition to the continued low interest rates, buyers are also seeing the inventory levels of properties in all price ranges continuing to slowly decline. Educated buyers are taking note of the trends and are increasingly ready to buy when they find the property they want and there is still a negotiating mind set on the part of sellers.
Chart courtesy Mortgage News Daily
While mortgage lenders and banks have continued to make some progress on relaxing the tight requirements that are needed to qualify for a loan, there is now the potential that new taxes and government regulations could have a detrimental effect on a market that is just now starting to show improvement. (See my commentary on the war on home ownership at gvenice.wordpress.com)
Appraisals continue to be an issue as they continue to come in at below market levels. I am hopeful this trend will be ending as financial institutions have begun scrutinizing the data and listening to Real Estate professionals and the public outcry that appraisals are inaccurate and the need for reforming the system should be considered. The current method of appraisal selection should also be examined. While the original concept was sound, it has swung to far to one end of the spectrum (low and critical appraisals) and needs to return to a more balanced approach with local appraisers giving local appraisals. In my opinion, the financial institutions need to continue to take prudent steps to facilitate the flow of money to qualified borrowers.
The sale of raw land continues to be somewhat sluggish. Land sales as a component of the total sales up slightly from last months 10% to 13% in October. I expect to see this up and down effect continue through the end of this year and then show steady signs of stabilizing as the available properties inventory continues to shrink. The best buying opportunities can still be found in the price ranges under $ 200,000.00, accounting for 82% of the total residential closings but the entire range of prices in the region show that sellers understand they are competing in a market with still high levels of inventory and are pricing their property accordingly. A buyer looking for a land or residential purchase has a great selection at prices that will not be this low for years to come.
If you are in the buying mode and you are looking at East Tennessee, my advice is the time to be making decisions is now. This region is always a good value but with interest rates where they are and with still higher than normal inventory available the time could not be better. If you are in the selling mode and located in East Tennessee, our recommendation would be to seriously consider getting your property on the market.
The total number of closings for the month was down slightly to 67, down from last months 70. This is the lowest total since March of 2013, the total sales dollars were $, 8,518,887 up 9.6% from last months total of $ 7,766,530.00. The unit average cost (which is the average of all closings) was at $ 127,148.00which was an increase of 16.5% over last months $ 110,950.00. In addition, the raw land component of the total number of closings was 13%.
While the overall market indicators continue to improve slowly, there remains a higher than normal level of inventory on the market and that continues to be felt. The average days on market for the region, when considering all properties is still in the 200+ days range, and that is well above the 170 day target we like to see. The trend going into the first half of the year will be for inventory levels to continue to shrink and that will result in a slow but steady increase in property values.
For more information or to discuss how we can assist you with your real estate needs, please contact one of our Real Estate Professionals or you can email us at firstname.lastname@example.org and we would be happy to answer your questions
Market Details Analysis
For the month of October, residential activity in the entire price ranges and areas continued to improvement. The land/residential market percentage showed a small gain of land sales component and the upper end residential properties are starting to show signs of improving.
If we look at the closing data over time we can see a steady increase in the number of properties being closed in our market area. We expect that the average closed sales count to be above 75 by the end of 2013.
The total sales volume for the region has been moving up over the course of 2013. With this trend continuing into 2014, the total monthly sales would be sustainable above $ 8,000,000.00 in total sales volume.
The average sales price is important because it shows trending in home and property value over time. As mentioned previously, the slipping back and forth will prove to be a continued trend and we are still expecting that trend to continue to move higher through the end of the year.
October 2013 U.S. Economic and Housing Market Outlook
MCLEAN, VA–(Marketwired – Oct 22, 2013) – Freddie Mac (OTCQB: FMCC) released today its U.S. Economic and Housing Market Outlook for October showing that the federal government shutdown, debt ceiling issues, and the slowing economy — including the severely depressed level of new home construction — are slowing the housing recovery heading into the fourth quarter of the year. A short preview video and the complete October 2013 U.S. Economic and Housing Market Outlook are available here.
- By the end of the year, expect mortgage rates to be around the 4.3 percent level, and head higher in 2014.
- Due to the government shutdown, we’ve revised down fourth quarter growth projections by 0.5 percent.
- Inventories remain tight at a 5 months’ supply as of September due to negative equity, a declining supply of distressed sales, and a severely depressed level of new construction.
- Expect the U.S. economy to add less than 1 million housing units in 2013 and around 1.15 million in 2014, significantly below normal levels.
- Construction employment is 1 to 2 million jobs below trend levels, which is roughly 1 year of non-farm payroll growth at current levels.
- Expect the ramping up of residential construction to take a while, and while economic growth will improve over the next year, the economy won’t be operating at full potential until sometime after 2015.
Attributed to Frank Nothaft, Freddie Mac vice president and chief economist.
“The housing recovery keeps chugging along despite a constant barrage of disruptions to the broader economy. We’re likely going to see the housing recovery slow down, but not shut down, as we close out the rest of this year due to tight inventories in many markets, rising mortgage rates and slumping consumer confidence. Fortunately, the housing recovery should continue to absorb the economic shocks in stride and improve next year.”
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. For more information please visit www.FreddieMac.com. Twitter: @FreddieMac
The above provided by Marketwire and Freddie Mac
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