Inventory hits record low as home prices soar

By Terry Hollahan

The inventory of 1,882 homes – 155 of those are condos or duplexes – continues a slide in home inventory that started back in August 2021 when 2,659 home were on the market in MAAR’s multiple listing service (MLS) that includes Shelby, Fayette and Tipton counties.

Going back 15 years to February 2007, there were 11,562  homes on the market for sale.

“It could be considered a housing shortage,” said Jimmy Norman, a broker and principal of Norman Realtors in Bartlett. “If a home that is priced right goes up for sale in Bartlett, Germantown, or anywhere now, really, you will have at least two to three offers in a day or two.”

And many buyers will bid up prices $25,000 to $30,000 above the asking price, he said.

“It’s a good thing for home sellers, and it’s good for buyers to get the really low interest rates we have right now,” Norman said.

Now, people who can sell making good profits will have to face the higher housing costs when searching for new place to live. 

Several factors are contributing to the shrinking inventory, including the cost of construction materials and supply chain issues.

It started when the pandemic hit in March 2020 and safer-at-home policies and social distancing epitomized life in America. In July 2019, there were 4,385 homes for sale in MAAR’s multiple listing service.

“People got nested in and didn’t want to move or even show their homes,” Norman said.

Builders didn’t know how much the pandemic would hurt housing demand, so construction on new homes slowed and so did the supply chain that feeds it.

Inventory was 3,365 in March 2020 when the COVID-19 pandemic hit Shelby County, but slumped for the next several months down to 1,976 in February 2021, then picked back up to 2,659 in August 2021. But it has dropped nearly 30 percent from there in just five months to the new record low.

Bartlett home sales in January lagged from a year ago, but the average sales price grew by 18.7 percent. 

MAAR reported 61 sales in Bartlett during January, down from 92 in January 2021. Only two of the homes sold in Bartlett in January were newly constructed homes and there were no bank sales from foreclosures.

Besides Bartlett and Germantown, January sales in the other suburban municipalities surrounding Memphis grew or matched January sales from a year earlier, and sales prices rose significantly in all of those markets.

The highest appreciation in sales prices from January 2021 to January 2022 occurred in Millington, where the average sales price rose 30.5 percent.

There were 19 sales in Millington for the month, up from 15 a year ago, with three of those being newly constructed homes.

Buyers paid an average of $279,802 for a Millington home last month, compared to $214,478 a year ago. The three new homes each sold for more than $380,000. 

Lumber prices soar

Another factor contributing to low inventory and rising prices is the cost of lumber used in framing houses and in renovations. 

After the pandemic hit, the price of lumber rose to a record high in May 2021, according to industry tracker Random Lengths. 

The Random Lengths Framing Lumber Composite index hit a record $1,670 per board foot on May 2, 2021, then dropped down to $474.70 less than four months later on Aug. 15. But prices have again risen, nearly doubling since Thanksgiving 2021. The index hit $1,323.90 per board foot on Feb. 13.

The recent jump in lumber prices added more than $18,600 to the price of a newly built home, according to estimates by the National Association of Home Builders. 

And the industry is expecting the first of several anticipated interest rate hikes in March, which could push potential homebuyers to get off the fence and make a purchase.

Higher rates also could shock some people who have been accustomed to very low rates for a decade or more.

“I’ve been in the real estate business for 43 years and I’ve never seen interest rates stay this low for this long,” Norman said. 

The federal funds rate has been close to zero since late 2008. While it did rise to 2.41 percent briefly in April 2019, it headed lower after the pandemic hit. 

“My banker tells me we will probably see a couple of bumps this year and a couple of bumps next year,” Norman added, but it would take significant increases to impact the local housing market.

“In West Tennessee, I don’t see a downturn in the housing market anytime soon,” he said.

Lakeland and Arlington 

Lakeland recorded 23 home sales in January, an increase from 17 a year ago. Six of those sales were new homes, accounting for 26 percent of the total sales.

The average sale price in Lakeland was $472,432, up 25 percent from $377,929 in January 2021.

Similarly in Arlington, the average home sale price rose 26.4 percent year-over-year in January to $396,620, up from $313,703.

There were 29 homes sold in Arlington in January compared to 24 last year. Four of the homes were newly constructed.

Germantown and Collierville

In Germantown, 44 homes sold in January compared to 58 in the same month of 2021. The average sales price rose 15.4 percent, from $466,604 a year ago to $538,681 last month. 

No newly constructed homes in Germantown sold in January.

The average price of homes sold in Collierville last month grew by 25 percent from just one year earlier, MAAR data shows. 

Collierville, one of the hottest housing markets in the MLS for sales and new home construction, matched home sales in January from a year ago at 63. The average sales price was more than a half million – $574,928 compared to $459,881 in January 2021.

Ten newly constructed homes sold in Collierville during the month, the same as in January a year earlier. The average price of those 10 new homes was $734,286.

Across the entire MAAR multiple listing service, home sales totaled 1,322 in January, down 13 percent from 1,520 in January 2021.

The average sales price soared by 20 percent, though, to $246,874 compared to a year ago when the average sales price was $204,946.