Hindsight is always 20/20 and in November of 2011 it will be very simple to just review the past year and see what actually did happen. But since it’s now November of 2010 we will have to look to the past years and the current economic data to make a future prediction. It’s always interesting to me to revisit my past predictions and see how I did.

Here’s my prediction for the 2010 Knoxville area real estate market. For the first three quarters of the year Knoxville area Realtors have sold and closed 7,862 residential units, that’s single family homes and condos combined. For the entire year of 2009 that total was 10,511. I don’t think there is going to be another 2,649 sales before 2010 ends so using the best available data it looks as if we will be down in 2010 compared to 2009. I predict total Knoxville area homes sold in 2010 will end up around 9,000 to maybe 9,500; down a little from 2009 levels.

NOTE: The chart below only contains sales data for the first three quarters of 2010.

Knoxville homes sold

9,500 sales in 2010 will put us roughly around the 2001 levels. I’m basing this prediction on past sales and the current state of the US and local economy.

Sales in 2010 were somewhat artificially inflated by the $8,000 dollar tax credit that has now expired for most buyers but there are still exceptions, i.e. military personnel serving outside the US. That credit served to prop up the market a bit this year and will not be available in 2011. I predict, if we’re very lucky, home sales in 2011 will hopefully equal 2009-2010 numbers and we will sell around 9-10,000 homes in the greater Knoxville area.

I also believe the bulk of sales in 2011 will be in the lower price ranges as they are now.

Year to date there have been at total of 16 closed sales of houses priced over one million dollars; that’s 1.6 sales a month. Currently there are 83 houses for sale at that price level. To get the absorption rate (time to sell) for that price you divide the monthly sales into the current inventory and you get 51.8 months, or over 4 years to sell just those 83 houses assuming no new listings come along. THAT is a sluggish market.

Contrast that to the “hot” price range now of $120,000 to $139,999 where you find 347 closed sales of in 2010 or 34.7 per month. There are currently 242 active listings in that price range so that would make their absorption rate 9.86 months. Lower priced homes are selling but the time to sell is still high signaling a buyer’s market for those homes as well.

Here are some things I base my prediction on:

  • JOBS: Jobs continue to be an economic problem, especially for housing. People with no jobs don’t usually buy houses and unfortunately, people with no jobs also get foreclosed on as well. The unemployment rate is officially 9.6% now and is essentially unchanged since May of this year. I believe the true unemployment rate is more in the 15-20% range because a lot of people have exhausted their unemployment insurance and are no long counted in the statistics. Also people like Realtors and other self employed persons are usually not eligible for unemployment benefits and are never counted whether working or now. Jobs will continue to be a drag on the housing market in 2011.
  • Economic uncertainty will continue: “Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence, while slightly improved from September levels, is still hovering at historically low levels. Consumers’ assessment of the current state of the economy is relatively unchanged, primarily because labor market conditions have yet to significantly improve. And, despite the uptick in Expectations, consumers continue to be quite concerned about the short-term outlook. Both present and future indicators point toward more of the same in the coming months.” I can’t say it better than that.
  • Interest Rates: While interest rates are as low as I’ve ever seen them in my 30+ years in real estate, jobs, available mortgage money, and consumer confidence will continue to keep buyers away in 2011. Anyone qualified and sitting on the fence waiting for lower prices, lower rates, whatever, should probably go ahead and buy now. Mortgage rates cannot go any lower and most sellers are taking a beating now when they sell. The time for qualified buyers with a stable job  to buy a home has never been better than it is right now.