Incomes not rising with home prices

I’m not sure when our 15-yearold son started looking at the real estate website Zillow, but it’s giving me the willies.

“Zillow willies” — that’s a new one.

Somehow, our son got plugged into the steep appreciation in home prices, and he now gives me updates on the website’s estimate of the value of our house, which is in an unincorporated part of Hamilton County.

Zillow calls its home-price estimates “Zestimates,” because of zee alliteration, you see. Just like Zaxby’s calls its salads Zalads. If I had a son named Zack, would I call his moods zoods?

See, the Zillow willies have affected my brain.

When teenagers get interested in home prices, it’s probably a signal that a real estate bubble is about to burst. Which, frankly, puts me in a bad zood.

Of course it’s nice to see your home’s value go up, but there’s a downside: If you have teenage or young-adult children or grandchildren, it’s difficult to see how they will be able to afford middle-class homes here like the ones they grew up in. With prices and interest rates going up in tandem, young people are facing a double whammy. Yes, wages are going up, too, but not enough to keep up with sky-high mortgage inflation.

In our little neighborhood of cul-de-sacs, homes that sold for under $100,000 when they were new in the late 1980s are now fetching mid-six-figure amounts. Recently, a couple have sold in hours for more than the asking price. The Times Free Press reported last month that the median home value in Chattanooga jumped 21% last year to $315,000.

According to investopedia.com, a good rule of thumb is that people can afford a mortgage that is 2 to 2.5 times their gross income. (Some websites say 3 to 5 times their income, but I’m going to go out on a limb and say 5 times your income is a dangerous stretch. I remember when the rule of thumb for mortgages was 1.5 times gross income.)

Let’s split the difference and say 2.5 times income is the new norm.

When a house goes up for sale here now, it’s a coin flip whether the buyer might be a local, an investor (looking to flip or rent the property) or an out-of-state person looking to move here.

That means to afford the average home in Chattanooga a person (or couple) would need a gross income of about $126,000, when the average household income here is actually only about $57,000. Herein, lies a problem.

Then, there’s this. I’ve met a handful of people from California and New York recently who have moved to the Tennessee Valley for its (relatively) inexpensive housing and generally low cost of living. (And great quality of life.)

While these are all lovely people, I’m sure, I can’t help but have a growing sense of dread that our well-kept secret is out of the bag and that we will all pay a price someday. When a house goes up for sale here now, it’s a coin flip whether the buyer might be a local, an investor (looking to flip or rent the property) or an outof-state person looking to move here.

I have to remind myself that, I, too, was once an outsider — having grown up in Middle Tennessee (Maury County), which has its own housing price issues. When I was young, neighboring Williamson County in Middle Tennessee was mainly farmland. According to Nashville’s Tennessean newspaper, the median home price in Williamson County, Tennessee, last month was $648,500. Yikes.

Could that be where we are headed here in a decade? Perhaps.

Zillow willies, indeed.