Knoxville Home Sales Rise in Early 2012
Americans are buying more homes in every region of the country, including East Tennessee. Home sales in the United States reached 4.62 million in April, according to the National Association of Realtors (NAR). That’s close to January’s pace of 4.63 million, which was the best in two years, but still below the nearly 6 million that economists equate with a healthy market.
In the South, house sales rose 3.5 percent from March to April. We’re seeing the same trend in Knoxville. In the first quarter of 2012, 2,313 single-family homes and condos were sold, according to data from the Knoxville Area Association of Realtors. That’s the highest first-quarter number since 2008, and only the second time since 2006 that first-quarter sales have risen from one year to the next.
Home prices haven’t returned to pre-bubble levels—the median sale price of a three-bedroom home was $127,000 in March, compared to $135,500 in March 2006—but an uptick in buying activity is still welcome news considering the past few gloomy years.
Economists think the following factors have contributed to the rise in home sales:
1. Builders are confident and starting to build more homes. In March, builders requested the highest number of permits to build new homes and apartments in three and a half years.Locally,218 residential building permits were issued in Knox County in the first quarter, according to local research firm The Market Edge. That represents a 25 percent increase from the first quarter of 2011. For a frame of reference, 2,790 permits were issued in Knox County in 2007 before the bubble burst and have fallen every year since.
The National Association of Home Builders/Wells Fargo builder sentiment index also rose to 29 in May. That’s the highest reading since May 2007 and up from a reading of 24 in April. Any reading below 50 indicates negative sentiment about the housing market, but the index is on an upward trend—it rose for six straight months before falling in April.
2. Mortgage rates are at historic lows. By the end of May, mortgage interest rates had fallen to the lowest levels since long-term mortgages were introduced in the United States. Data from the National Bureau of Economic Research showed that between July 1950 and February 1951, long-term rates averaged 4.08 percent. The average 30-year rate for the last week in May was 3.78 percent. These lower rates are making it easier for more Americans to buy homes.
3. The job market has improved. Before May’s jobs report came out, there was evidence that hiring was picking up. The unemployment rate had fallen from 9.1 percent in August 2011 to 8.1 percent in April. However, employment didn’t accelerate last month as much as economists had predicted, so it remains to be seen how that news affects the housing market.
One fun fact about Knoxville’s housing market: the metro area tops the nation for percentage of one-person households. Aggregated data from the 2010 U.S. Census shows that 32.9 percent of households in Knoxville are single person, the highest rate out of 100 metros. The large amount of young professionals and college graduates in the area, as well as affordable housing, are possible reasons.
Eric Schmittou can be reached at 865-766-3022 or eric.schmittou@pnfp.com.
