For those waiting for the price of single-family homes in Chattanooga to start coming back down, they should forget about it, the president of the Greater Chattanooga Realtors Association says.
Robert Backer on Tuesday told members of the Downtown Kiwanis Club, "Those prices may level off a little, but they're never going to go back down."
Mr. Backer said Chattanooga "had been our own little hidden secret, but now everyone else has found out."
He said people from far-away sites like California, Chicago, New York and Florida are moving to Chattanooga in droves.
Mr. Backer said the Scenic City is also picking up many new residents from places like Atlanta and Nashville. He said Nashville is "too crowded and too expensive," but many find Chattanooga just right.
The outside influx and the surging home prices happened during the COVID-19 pandemic when companies were forced to let many of their employees work from home. He told of a San Francisco couple who work remotely and have moved here where "the cost of living is much less than San Fran."
Mr. Backer said, as a result, Chattanooga homeowners have found out they "have tons of equity and they can make a lot of money selling their house." On the flip side, he said, "You are going to have to pay a lot of money to get another one."
He said during his 25 years as a Chattanooga realtor "I've seen our market go in some different directions, but nothing like this. It's been a crazy couple of years."
Mr. Backer said 3-4 years ago Chattanooga would have from 2,500-3,500 houses on the market at any one time. He said it got down to 450 two months ago and has rebounded slightly to the current 1,047.
He said the median house price has risen over 25 percent in that short time, rising $5,000-$8,000 per month in recent times. He said the median house price in Chattanooga in 2019 was $214,000. It was $237,000 a year ago, but is now at $275,000.
"This market is very frustrating - unless you're a listing agent. Then it's great," he said.
Mr. Backer said at one time "You could put a house on the market at $300,000, then get a $280,000 offer and negotiate on that. He said, "Nowadays, you really can't do that." He said multiple offers - most above the list price - are now the norm. Houses here overall now sell for 100.5 percent of the asking amount.
Mr. Backer said a year ago houses stayed on the market an average of 42 days before selling. Now it is 17 days, and many sell within hours or days.
He said in some cases frantic buyers are waiving pre-purchase appraisals and/or inspections. And he said some sellers are trying to take the frenzy to an even higher level - though these prices sometimes outstrip the appraisal when the buyer goes to get a mortgage. But he said the appraisals are beginning to catch up with the escalated prices as new higher "comps" come in.
Mr. Backer said he had house hunters interested in a house at Timbercrest in East Brainerd with a gorgeous pool. He said by the time they began to make their bid there were 24 offers ahead of them. He said the house that was initially offered for $385,000 likely wound up selling for over $425,000.
He said Ooltewah, which was kick started by the announcement of the Volkswagen plant, "still is the fastest-growing market." He said multiple apartment projects are going up there and at Collegedale. He said Red Bank "is a hot spot now" and there is growing interest in East Ridge, with its new developments at Exit 1. He said North Chattanooga is "priced out so that most people can't afford it," but he said the interest is seeping on up toward Hixson. Another big growth area is the Southside, including along Main Street toward the Ridge.
Mr. Backer said many of those from out of town "love old houses" and they are buying in such areas as Highland Park.
He said outside hedge fund money is definitely affecting the local real estate market, especially when it concerns apartment complexes. He said, "A lot of these are selling and the sellers are making a ton of money." He said the former Mansion Hills Apartments in North Chattanooga turned a $15 million profit for a recent buyer turned seller.
Mr. Backer said the high costs are pricing many out of the market, noting he is having trouble finding a home for his young son who plans a firefighter career with its limited income.
He said one idea being explored is to convert commercial space in some downtown buildings to residences.
He noted that some are turning to apartment living, but he said they can cost as much as $1,500 to $1,800 per month.
Mr. Backer said landlords are among those facing perils in the current COVID situation with many renters stopping payment but staying on. He said, "This can be devastating for landlords, who can't stop paying the banks on their mortgages."
Contractors are also up against it, he said, facing skyrocketing supply costs and having trouble finding workers. He said a lumber kit that formerly cost from $1,800 to $2,000 is now $10,000 to $15,000. Added costs for building a new house amount to $30,000 to $35,000 due to the inflation, he said.
Another contractor woe is having trouble getting supplies. He said houses that used to take six months to build now may take nine months.