Market Update – January 2014
By Gary J Venice
February 5, 2014
Welcome to our opinion of our Regional Market Analysis of East Tennessee Real Estate for January, 2014 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 last four months have shown a slow down in the market that is a result of several factors including the historical dip due to the holidays, the uncertainty due to economic impact of the affordable care act and weather. In January we are seeing the lost number of closings as well as the total sales for the region at their lowest points since we began tracking data in 2009. While buyers continue to return to the market in our region, the factors outlined above had had a significant impact. This is particularly true in January as the regional weather was a significant deterrent.
On the positive side, we have seen a marked increase in inquiries across the full range of residential property prices and also an uptick in requests for information on raw land. The region has also seen news indicating that job growth is improving as more companies announce plans to come to the area and existing companies are making plans to expand. Interest rates remain low; however I expect the trend to move up over this year with rates in the 5.5% range by years end. We also believe that the foreclosure and short sale market here are past there peak and have begun to retract and we expect that to continue here through the end of 2014.
The rate for an average 30 year fixed conventional loan is 4.24 %, a 15 year fixed is 3.30%. 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.
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.
Appraisals continue to be an issue as they continue to come in at or 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. It is my opinion that 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. The sale of raw land as a component of the total sales was up slightly from last months 11% to 14% in January. 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 96% 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 28, down from last months 45. This is the lowest total since we began tracking data in 2009, the total sales dollars were $ 3,221,400.00, down 21% from last months total of $ 5,484,216.00. The unit average cost (which is the average of all closings) was at $ 115,050.00 which was an decrease of 7.2% over last months $ 121,871.00. In addition, the raw land component of the total number of closings was 14%.
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 email@example.com and we would be happy to answer your questions
Market Details Analysis
For the month of January, residential activity in the entire price ranges and areas remained steady. 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 2014.
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.