Pending home sales – a leading indicator for home sales – fell again in October 2022. Nevertheless, contract signings fell slower than the previous month. While it takes one to two months for a home sale to complete, this could mean that we may see more housing activity in the new year.
Mortgage Rates Peak
In addition, mortgage rates have likely peaked. After surpassing the 7 percent threshold in the second week of November, rates are finally moving down as inflation is cooling. The higher federal funds rates are starting to tame inflation. Rates are still more than double those of a year ago, but if inflation continues to slow down, rates may stabilize below 6 percent. This could bring more buyers back to the market boosting demand for housing. However, housing inventory will remain tight in 2023.
Building Material Bottlenecks
First, the number of housing starts will continue below the historical average of 1.5 million due to persistent building material bottlenecks. Single-family construction will be most impacted. While 2022 is the first year with a decline of single-family starts since 2011, single-family construction is forecasted to experience additional declines in 2023.
Strong Job Market
A strong job market typically supports housing demand as household incomes continue to grow. Thus, areas with stronger job growth compared to the national level typically experience higher homebuying activity than other areas.
Information industry jobs are one of the most well-paid jobs. These workers are paid about 50% more than the average employee. Therefore, areas with fast-growing jobs in the information industry are expected to experience stronger housing demand than other areas.
The information industry is a rapidly growing part of the economy. When demand for this industry is growing in an area, that creates opportunities for the local economy to grow faster than in other areas. Thus, the economy is expected to grow faster in areas with a larger information industry.
When more people move into an area compared to those who move out, this means that more people will look for a home in this area as they will need a place to live in. Thus, areas with migration gains are expected to experience stronger housing demand.
Teleworking has a different impact on affordable versus expensive areas. Data shows that people continue to embrace teleworking. An affordable area with many remote jobs can attract more movers (positive effect). However, thanks to teleworking, many workers were able to move out from expensive areas to more affordable areas (negative effect).
Population changes can lead to a changing demand for housing. When the population rises, housing demand does too, while a declining population leads to lower housing demand. Thus, housing demand is expected to be stronger in areas with a fast-growing population.
In the areas where housing supply meets better housing demand, buyers have more options. Thus, people are more likely to find a home to purchase in these areas increasing home sales activity.
What Makes Chattanooga TN an Attractive Market?
Over the past several years, Chattanooga has solidified its dedication to entrepreneurship with city events like Startup Week and an innovation district. In its quarter-mile radius, Chattanooga’s innovation district is home to a growing network of startups and incubators in close proximity to encourage collaboration.
Although Chattanooga has burgeoning tech and entrepreneurial scenes, the government, education services, health services and manufacturing sectors are also major employers. Among Chattanooga’s largest employers are Erlanger Health System, CHI Memorial Hospital, BlueCross BlueShield of Tennessee, Hamilton County Schools, Tennessee Valley Authority, Volkswagen Group of America and McKee Foods Corp.
Chattanooga ranks as the ninth hottest market for 2023 in a new ranking by Realtor.com.
Chattanooga was the only Tennessee city and one of only four in the southeastern United States on the top 10 list of growing cities for home sales in 2023.