Many consumers and Realtors may not be aware that in addition to the written report published in print and online, GCAR also films a monthly market report. We post these videos on social media, including our YouTube channel. We film these reports at a local business. For example, just a few days ago, I rode around with an Uber driver to about the Uber concept and how it’s being received in Greater Chattanooga.
You see, Realtors live, work and play in the same communities in which we help clients and customers with their real estate transactions. Not only are our “on location” market reports a nice change of pace from the talking head in front of a logo-plastered backdrop, they are a way for the Association to showcase local business – the fabric of life in Greater Chattanooga – and how our business mutually might impact one another.
From an Uber ride, tattoo parlor and the Chattanooga Zoo to the Discovery Museum, Chattanooga Brewery and the International Towing & Trucking Museum, GCAR’s local business features show off the all that Greater Chattanooga has to offer. In our conversations, I find myself using economist lingo used in our monthly market reports and how we calculate certain statistics. Thus, I wanted to provide a layman’s explanation of that terminology.
On the 11th of each month, GCAR pulls all the housing numbers from the preceding month. By running the numbers at the same time each month, we are able to establish how our market is performing within that one-month timespan. Also, it allows us to provide year-to-date and year-to-year comparisons. On the surface, it may seem we’re reporting “old” information; yet, we cannot report the numbers until our Realtors have had time to close out transactions in the multiple listing service, especially for the numerous properties that change hands on the last few days of each month.
We report on listing activity, including New, Pending and Closed Listings. New Listings are a count of the properties that have been newly listed on the market within the specified time period. Pending Listings are a count of the properties on which buyer’s offers have been accepted by sellers. Closed sales are the actual transactions that close, or sold, in a given month.
Prices are another monthly highlight. The Median Sales Price is the middle ground on local home prices – the point at which half of the sales sold for more and half sold for less. When calculating Median Sales Price, we do not account for seller concessions, which include any funds paid toward buyer’s closing costs or prepaid by the seller.
In determining the Average Sales Price, we also exclude seller concessions. The Average Sales Price is determined by adding together the sales price of all closed sales and dividing that total by the number of all closed sales.
Regardless of which direction Median and Average Sales Prices are headed, it’s also important to consider the percent of the original list price received. This statistic reflects how well our market can sustain the prices being asked by sellers. We find the percentage by dividing a property’s sales price by its original list price, then taking the average for all properties sold in a given month, not accounting for seller concessions.
As prices rise, some may get concerned that the market could outgrow what is affordable for local buyers. This is where the Affordable Housing Index comes into play. This index measures housing affordability for the region, meaning the median household income necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability. We’ve not seen this Index decline locally in quite some time, which bodes well for sellers and buyers.
When entering the market, sellers want to know about the average Days on Market. We take the average number of days between when a property is listed for sale and when an offer is accepted by the seller. While this number is helpful, there are additional factors, including available inventory, that impact Days on Market for a particular property. Often, there are outside factors impacting the ability to grow local inventory.
The Months Supply of Inventory is the number of homes for sale within the month reported, divided by the average monthly pending sales from the last 12 months. A low inventory typically means we are in a seller’s market – more buyers than homes for sale. Alternatively, when there is a high number of available properties and few buyers, it typically becomes a buyer’s market. However, consideration also should be given to the local absorption rate – the number of homes purchased divided by the number of homes for sale remaining at the end of that same time period. The higher the absorption rate, the more quickly homes are selling and the lower the inventory.
For all you non-economists like myself, I hope that these explanations might help us all better understand local market conditions. GCAR is proud to be able to provide this monthly insight into how the real estate market is performing, as we are keenly aware how much that impacts the bigger picture.
The Greater Chattanooga Association of Realtors is “The Voice of Real Estate in Greater Chattanooga.” The Association is a regional organization with more than 1,500 members and is one of more than 1,400 local boards and associations of REALTORS nationwide that comprise the National Association of Realtors. The Greater Chattanooga Association of Realtors services Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. For more information, visit www.gcar.net.
By Travis Close, ABR, GREEN, GRI, e-PRO
President, Greater Chattanooga Association of Realtors