Why Are Houses More Expensive?

Local Market Case Study

As of April 24, 2023, only 22 houses were available on Signal Mountain. A historically balanced market would offer over 5-times that number. The limited housing supply on Signal Mountain has intensified competition among potential homebuyers, leading to historically high price points. Compare today’s average home price of over $700,000 with that of 2020’s average of $456,185. Signal Mountain Local Market Snapshot

(37377, Hamilton Co, 4.24.23 via Greater Chattanooga Association of Realtors MLS)

What About Interest Rates? 

Despite interest rates tripling over the last 12 months, 2022 was a record-breaking year on Signal, and 2023 is trending in the same direction. Signal’s key market drivers include the nationwide housing shortage, significant migration into the state, TN’s low tax burden (2nd lowest in US), Signal’s nationally-ranked school system, and of course, lifestyle.

What Does This Mean For Sellers?

The lack of available homes on Signal Mountain and in Chattanooga has several results, which might prove beneficial to Sellers on Signal:

What’s Driving The Low Inventory?

This shortage isn’t only affecting Signal Mountain but reflects the larger market in Chattanooga (Hamilton County), which is experiencing the limited housing challenge at 1.3 months of inventory. (Balanced market = 6 months inventory). Several factors contribute to the limited housing availability in the Greater Chattanooga area:

• Growing Population: Chattanooga has seen a significant influx of new residents, drawn to the area by its natural beauty, vibrant arts scene, and strong job market. In fact, for every 1 person who moves out of Chattanooga, 3 more move in. This population growth has put pressure on the housing market, resulting in a shortage of available homes. 
• Favorable Tax Environments: Tennessee is one of 9 states with no state income tax, and ranks as having the 2^nd  lowest tax burden of all US states. This is driving Buyers from across the country to our local area.
• Increased Investment: Investors have taken note of Chattanooga’s affordability and growth. Even with record-high price points in our city, our median home price is still 15% below the national median.
• Decreased New Construction: National Housing Starts and Permits dropped in 2022 to near pandemic levels, slowing the addition of new construction homes to the market, a significant factor in the low supply – high demand ratio. Layer this with pre-pandemic low inventory caused, in part, by the 2008 Great Recession. 

How To Navigate This Market

This nationwide and citywide shortage of homes has led to increased competition among homebuyers, driving up home prices and reducing the time properties stay on the market. For those looking to buy a home in the Chattanooga area, it is vital to educate yourself on market conditions in order to act quickly and wisely in this competitive market. We’re here—with our 3 decades of experience in the Greater Chattanooga market—to help equip you to compete. Meantime, keep up with market changes with our Weekly Market Data Updates here. If you’re considering selling, it would be our privilege to have a conversation to provide a market perspective with a complimentary and confidential price evaluation of your property. Call (423) 413.4507 to schedule your appointment. We’re here to serve and invite you to explore our work and more local market data here.