Memphis Home Prices Dip Slightly in First Half of 2003

by David Royer, Memphis Business Journal Reporter

 

First-time home buyer Jeff Yates searched homes from East Memphis to East Buntyn near the University of Memphis for three months before he settled on a bungalow in Midtown’s Evergreen neighborhood this summer.

 

“I was actually looking for a smaller home in the Midtown area, in the $125,000-$150,000 range,” says Yates, a 34-year-old staff accountant at Pfizer, Inc. “There were quite a few that I looked at.”

 

Yates is one of many young professionals who became homeowners in the past few months, as low sales prices coupled with record low mortgage rates made Memphis an attractive place to settle down.

 

While other areas of the country are seeing double-digit percentage increases in home prices, Memphis’ second quarter average sales price of $132,600 is just 0.4% above the same period in 2002.

 

The average price for a home in the Memphis area actually slipped over the course of the year from a high of $133,500 in January to $130,200 in July, according to the Memphis Area Association of Realtors.

 

2003, with its record-low mortgage rates, has been a tremendous year for first-time buyers purchasing starter homes, says John Criswell, principal broker with Crye-Leike’s Arlington office.

 

The influx of new, younger buyers is behind this year’s slight dip in median sales price, he says.

 

Starter homes in Memphis usually fall in the $120,000-$150,000 range. That, says Criswell, could account for the fall in average prices.

 

“These rates have been so attractive that people coming out of apartments are now able to own a house,” Criswell says.

 

By comparison, Riverside, Calif., has seen a 23.5% increase in home prices over 2002, according to data from the National Association of Realtors.

 

A typical house there might have cost Yates $212,600, nearly the price of two similar houses in Memphis.

 

Memphis’ median price was below Knoxville ($141,300), Kansas City, Mo., ($144,700); Birmingham, Ala., ($148,900); and Atlanta ($151,400).

 

Little Rock’s median was $105,200; the median in Jackson, Miss., was $114,800. No data was available for Nashville.

 

Nationally, the median home price in Memphis was significantly lower than the average in the Southern region ($157,400) and the U.S. as a whole ($168,900). Western states are the most expensive places in the country to buy a home, led by the San Francisco bay area, where the average home lists for more than $560,000.

 

The Northeast corridor remains slightly less expensive, but markets there are growing at rates that are beginning to exceed the national average.

 

NAR lists the annual increase in prices for the Memphis area at 5.1%, a rate comparable to several peer cities and the Southern region as a whole.

 

New Orleans, with a median home price of $133,200, has a 5.8% rate of increase. Louisville, Ky., with a median price of $131,200, increased by 4%.

 

Memphis’ slow-to-no growth in real estate prices is typical for this market, which generally follows the normal rate of appreciation with few noticeable fluctuations, says Isaac Northern, president of MAAR.

 

“We’re pretty steady here,” he says. “We don’t have the activity here that would cause great changes. Typically the Memphis market is able to absorb any changes.”

 

Northern notes that a steady construction rate by builders shields Memphis from large boom and bust cycles, helping to stabilize prices in the residential market. That stability, he says, will likely continue for the foreseeable future.

 

Yates may have made a good decision buying his house now rather than waiting. Interest rates are beginning to creep back up, and the window for new homeowners could be closing.

 

As Criswell says: “You either buy a house now, or you’ve missed the boat.”

 

CONTACT intern David Royer at 259-1732 or droyer@bizjournals.com