Southern real estate stays hot despite cool economy

Located in the middle of the hottest real estate markets in the country, Chattanooga ranks among the top 10% of U.S. cities in a new comparison of the housing markets in America’s major metro areas.

Despite a drop in home sales this year due to higher interest rates and more economic uncertainty, home values have held up in many Southeastern cities over the past year, including Chattanooga. The personal finance website Bankrate.com ranked Chattanooga as the 21st hottest housing market in the country among the 212 biggest

U.S. metro areas included in Bankrate’s Housing Heat Index.

Knoxville and Nashville scored even higher and were among the top 10 housing markets in the country. Bankrate said the No. 1 overall hottest market is Gainesville, Georgia, 120 miles southeast of Chattanooga.

The 10 hottest markets on the Bankrate list are all in the Southeast, and all but three of the top 25 hottest housing markets in the United States are in the South.

“The momentum in the U.S. housing market has shifted sharply to the Southeast,” Bankrate analyst Jeff Ostrowski said in a new report. “Our

“The region’s comparatively affordable prices are attractive to buyers moving in from more expensive parts of the country.” — JEFF OSTROWSKI, BANKRATE ANALYST

research shows metro areas in Georgia, Tennessee, Florida and North Carolina atop the list of the country’s strongest seller’s markets.”

Lawrence Yun, chief economist at the National Association of Realtors, said the Sun Belt boom reflects the shift by many businesses and workers to lower-cost markets.

“It’s all about job growth and affordability,” Yun said in a new report.

Unemployment in April in Georgia and Tennessee remained below the rest of the nation with employment growth above the national average in both states. In Tennessee, the Tennessee Department of Labor and Workforce Development said the nonseasonally adjusted jobless rate in April dropped to an all-time low of 2.6%.

Housing sales are slowing in Chattanooga during 2023, with home sales down by more than 10% in April, according to the Greater Chattanooga Association of Realtors. Steve Sharpe, association president, blamed some of the drop on the limited inventory of houses available for buyers.

“The housing market is shifting all over the country, and inventory remains tight nationwide,” Sharpe said in a report on April’s home sales in Chattanooga. “The lack of existing inventory continues to impact home sales.”

The inventory of homes on the market is up in Chattanooga from a year ago but remains well below the pre-pandemic levels in 2019, Sharpe said.

The median price of homes sold by Realtors in Chattanooga rose by 15.1% in 2022 — and by more than 63% over the past four years — to a record high of $305,000, according to the Greater Chattanooga Association of Realtors.

Nationwide, the median sales price for homes sold rose slightly less — 13.2% in 2022, according to the National Association of Realtors. But the national median price of $479,500 at the end of the year was still 57% above the median price in Chattanooga in 2022.

In April, the median sales price in Chattanooga was down 1.6% from the end of 2022 to a median sales price of $300,000, according to the Greater Chattanooga Association of Realtors. But nationwide, home prices have dropped far more, declining nearly 19% in April since the end of 2022 to a national median price last month of $388,800, according to the National Association of Realtors.

The housing market was buoyed in recent years by historically low mortgage rates, but the rate on the most popular U.S. mortgage just jumped back above 7% this past week for the first time since March, according to Bankrate. Aggressive interest rate hikes by the Federal Reserve Board to control inflation have more than doubled 30-year mortgage rates from the pandemic-era low mortgage rates of around 3%.

Higher mortgage rates have shifted the housing market and made homes less affordable, especially for first-time home buyers, said Jay Robinson, a Keller Williams Realty team leader who was Chattanooga’s top-selling Realtor in 2022.

“But our market in Chattanooga is holding up remarkably well,” Robinson said in a telephone interview. “I think there are going to be certain pockets in Southeast Tennessee and Northwest Georgia that are going to continue to grow, but I think overall we’re going to start to see a slowdown.”

Ostrowski, the Bankrate analyst, said home prices have dropped in much of the country, especially in the West. But home values have held up stronger in the Southeast, which has attracted many businesses and homebuyers migrating to cheaper markets.

“The region’s comparatively affordable prices are attractive to buyers moving in from more expensive parts of the country,” he said.

Greg McBride, the chief financial analyst for Bankrate.com, said the Southeast was poised for more growth.

Take lower-cost and lower-tax areas that continue to add population, add in the limited inventory of homes for sale, and you have the recipe for housing market strength,” McBride said in the Housing Heat Index report.