The numbers might have been heavy, but the delivery was light.
Dr. Jessica Lautz, deputy chief economist and vice president of research for the National Association of Realtors, brought a steady stream of statistics – and quips – to Greater Chattanooga Realtors’ annual Economic Outlook Breakfast Aug. 8 at the Chattanooga Theatre Centre.
Armed with a deck full of charts, Lautz mixed national trends with local realities, showing where Chattanooga mirrors the U.S. housing market and where it outpaces it. She also worked in generational jabs and a pointed reminder that a 0.2% drop in mortgage rates won’t even cover two coffees at Starbucks.
A city feeling the squeeze
Lautz has visited Chattanooga multiple times since joining NAR in 2007, and each time, she said, the city feels busier and more vibrant.
“As my Uber pulled into the hotel last night, there were people out. Every time I come here, it’s grown,” she said. “But growth puts pressure on the housing market – and you’re feeling that in inventory and affordability.”
Chattanooga’s home price growth, she noted, has been “much stronger than what we see nationally,” with year-over-year gains approaching double digits while many U.S. metros hover around 1% or 2%.
That growth plays out differently depending on the side of the closing table.
Tale of two markets
“There are really two housing markets right now,” Lautz said. “Homeowners are sitting in a great spot. They have low rates – if they have a mortgage – and they’re gaining equity as prices rise. First-time buyers are struggling to get in. It’s the haves versus the have-nots.”
Nationally, home sales volume has dropped to mid-1990s levels, even though the country has 75 million more people than it did then. Inventory has ticked up from the extreme lows of 2020-21, but it’s still well below historical norms.
“Yes, there are double-digit percent increases, but when you go from one of something to two of something, that might be a 100% increase – and you still don’t have a lot,” Lautz said.
The lock-in effect
Mortgage rates have been stuck in the mid-6% range since January.
“We were celebrating yesterday that it dipped to 6.5%,” Lautz said. “I did the math – that’s about $30 a month. Two people could spend that at Starbucks without even trying.”
Stable rates do offer predictability for buyers, and they’re still a full percentage point below the long-term historical average of 7.74%. But they’ve also kept many would-be sellers on the sidelines.
“The ‘lock-in effect’ is real,” Lautz said. “The majority of people with a mortgage are under 4%, so they look at today’s rates and say, ‘No thanks.’ Even if they could buy down their rate or put down a larger payment with their equity, they might be fixated on that number.”
Local prices, local wealth
In Chattanooga, that equity is substantial. Homeowners who bought five years ago have gained an estimated $152,000 in housing wealth. Statewide, prices are up nearly 68% over that period –a far outpacing the national average of about 50%.
Such rapid appreciation has a flip side: affordability. In the Chattanooga area, the income needed to purchase a median-priced home with 20% down is about $87,000 – and higher for buyers using lower down payment programs.
The typical income of a first-time buyer has jumped $26,000 in just the past two years, Lautz said, leaving many middle-income workers priced out.
“That means fewer teachers, fewer first responders becoming homeowners in the communities where they work,” she said.
The cash advantage
Equity-rich repeat buyers, especially baby boomers, are a major force in the current market. Nearly one-third of them are paying all cash for a primary residence. Among older boomers in their 70s, that share is about 50%. For younger boomers in their 60s, it’s about 40%.
This isn’t limited to primary homes. Roughly half of vacation-home buyers and 40% of small-scale investors are buying with cash. Even one in 10 first-time buyers is doing the same, often with help from family, proceeds from financial assets or inheritances.
“This is a different kind of first-time buyer,” Lautz said. “They have access to resources that let them put down bigger payments, offset rates and win in competitive situations.”
Migration and jobs
Housing demand in Tennessee is also fueled by migration. The state gained nearly 80,000 residents last year, with growth rates ahead of the national pace.
While most newcomers are settling in suburbs or small towns – often for affordability – Lautz noted a nationwide rebound in downtown living. Chattanooga, she said, shows visible signs of that trend.
“When I walk your downtown, I can feel the revival,” she said. “But it’s not just millennials moving in. Seniors are downsizing to luxury condos with amenities that make life easy.”
Generational shifts
One of Lautz’s favorite charts (“Every nerd has a favorite chart,” she confessed) shows the median ages of buyers. First-timers are now 38, up from 28 four decades ago. Repeat buyers are 61, up from 36 in the same period.
“That’s 10 years of lost housing wealth for first-time buyers,” she said. “And a 61-year-old buying a home is probably not moving again in five years. They might be in that home for 15 to 20 years.”
Boomers are also rewriting the downsizing playbook.
“They tell us they’re moving to downsize – and then they buy a place that’s 100 square feet smaller,” Lautz joked.
Gen X buyers are more likely than any other group to purchase multi-generational homes, often accommodating adult children, aging parents and children under 18 all at once. Millennials, meanwhile, are aging into their 40s and still catching up on wealth-building years lost to delayed homeownership.
Lifestyle drivers
Lifestyle trends are shifting the makeup of the buyer pool in ways that aren’t strictly financial.
Pets are a factor in 16% of moves, Lautz said, and 71% of households have one.
“You adopt a dog, and before you know it it’s a hundred pounds – and your apartment just isn’t going to work anymore,” she said.
Marriage rates have dropped to half of all adults, down from 70% in the 1960s, and only half of buyers today are married couples. Single women are outpacing single men in home buying despite lower average incomes, making homeownership a top priority even when it requires significant sacrifice.
As for children, only 27% of buyers have children younger than 18 – the lowest share ever recorded. High child care costs, which can rival or exceed housing costs in some states, are one reason for the decline.
Realtors’ role
The human side of the market was another recurring theme. Lautz praised Realtors for their community involvement, noting they volunteer at three times the national average.
“Buyers want someone who knows the local community,” she said. “That connection matters as much as transaction skills.”
Use of agents is rising: 89% of buyers and 90% of sellers now work with one. FSBO sales have dropped to an all-time low of 6%, with most sellers seeking professional help to price, market and prepare their home.
Sellers are also leaning more on agents for advice on pre-sale improvements.
“Buyers expect homes to look like they do on TV,” Lautz said. “Sellers’ homes ... usually don’t. They need an expert to tell them what’s worth doing in their local market.”
The case for ownership
If Lautz could give buyers only one data point, she said it might be this: the median net worth of a homeowner is about $430,000, compared to $10,000 for a renter.
“That one stops the conversation,” she said. “People start thinking differently when they see it.”
The economic benefits ripple outward. In Tennessee, the sale of a typical home adds nearly $121,000 to the local economy when factoring in everything from construction jobs to paint and furniture purchases.
Looking ahead
Lautz expects mortgage rates to move down by 2026, potentially adding hundreds or even thousands of eligible buyers in markets like Chattanooga. But she doesn’t see an overnight fix for affordability or inventory shortages.
“This is still an unusual housing market,” she said. “The people with money are active and pushing prices up. For others, especially first-time buyers, the barriers remain high.”
Her advice to Realtors: use the tools NAR offers – from local market dashboards to monthly reports – to educate clients with real numbers, whether it’s about equity gains, the economic impact of a sale or the long-term wealth gap between owners and renters.
“It’s your data,” she reminded them. “Play with it, share it, and put it in the hands of consumers in a way they can understand.”