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Knox County avoids slow housing market


Local real estate agents and business officials believe the housing market in Knox County is not heavily influenced by the downturn in the housing market predicted by business analysts across the country due to an increase in the prime interest rate.

Emma Bea Stallings, a realtor with Realty Executives in Farragut, said in her 14 years of real estate experience she has seen a steady flow in the local real estate market.

“I think our whole area is rather immune to the changes that affect other areas,” she said. “It seems the economy of the nation may go up and down, but our housing market remains pretty stable.”

Detailed market analysis recently published by business information analysts IBISWorld underscores the national trend and points to a two-year housing market slowdown followed by a gradual rebound.

The value of single-family housing construction is forecast by IBISWorld to decline by 4.9 percent in 2006, and 5.6 percent to a cyclical trough at around $380.3 billion in calendar year 2007 (in constant 2005 prices).

The number of single-family housing starts is also projected to decline over the short term to a cyclical trough at 1,520,000 units in 2007 (11.4 percent over two years). Industry revenue is forecast to decline roughly in line with the value of new housing construction, falling by 2.7 percent in 2006, and 4.2 percent to a cyclical trough of around $340 billion in calendar year 2007 (in constant 2005 prices).

The outlook for the multi-family housing construction industry, said IBISWorld officials, is for subdued cyclical growth in revenue averaging 1.5 percent per annum to December 2010, lagging well behind the projected pace of US GDP growth of 3.0 percent per annum, but corresponding with the projected weak average growth in value of new multi-family housing construction, and the volume of multi-family housing starts.

The U.S. Commerce Department said in May that builders in the U.S. broke ground on the fewest homes in 17 months in April as higher mortgage rates sapped demand.

Housing starts fell 7.4 percent, more than economists expected and the third straight drop, to an annual rate of 1.849 million from 1.996 million. Building permits, a sign of future construction, fell 5.4 percent to an annual rate of 1.984 million.

Housing numbers from the Knoxville market, however, show a different trend.

According to numbers from the Knoxville Area Association of Realtors, which divides home sales into the categories of homes with two bedrooms or less, three-bedroom and four-bedroom homes, the first quarter of 2004 saw the sale of 359 two-bedroom homes, 1,542 three-bedroom homes and 650 four-bedroom homes.

In the first quarter of 2005, association records show there were 394 sales of two bedroom or less homes, while the three-bedroom homes increased sales to 1,791. Four bedroom home sales increased to 694 homes.

In the first quarter of 2006, sales numbers increased again. The Knoxville Area Association of Realtors shows that two-bedroom home sales numbered 489, while three-bedroom home sales increased to 1,995 and four-bedroom home sales numbered 775.

The average sales price for these two bedroom homes in the first quarter of 2004 was $88,000. Three-bedroom homes averaged almost $133,000 and four-bedroom homes averaged $247,000.

First quarter sales for 2005 averaged $85,000 for two-bedroom dwellings, $146,000 for three-bedroom homes and $264,000 for four bedrooms.

In the first quarter of 2006, two bedroom homes averaged $97,000, $157,000 for three-bedroom homes and $289,000 for four-bedroom homes.

“We are just a popular place,” Stallings said. “A lot of people with good financial means are moving to this area.”

Dr. Don Bruce, an associate professor with the Center for Business and Economic Research at the University of Tennessee, said the Knoxville housing market seems to be immune from the effects of housing downturns.

The center studies trends for municipalities as part of its function. In general, when the prime interest rate goes up, the housing market tends to go down due to higher interest rates and fewer consumers buying homes.

“From my experience, that usually isn’t the case here in Knoxville,” he said.

 

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