JOHNSON CITY, Tenn. (WJHL) — Kennedy and Daniel Peacock bought their first home two years ago, and the couple in their late 20s couldn’t feel more fortunate.
“A lot of my friends, particularly the ones who are married, have recently bought houses and have had a bad time doing so,” Peacock said, sitting in the living room of her three-bedroom, one-bath home in south Johnson City.
The Peacocks only had to deal with one serious challenge as they looked around before buying in April 2021 — very tight inventory that meant many homes were bringing more than their asking price and entertaining multiple offers that sometimes turned to bidding wars.
A lot has changed since the Peacocks locked in an interest rate around 3%, and none of it has been buyer-friendly, especially for first-time buyers.
“My partner and I both feel extremely privileged to be able to actually have locked in when we did,” Peacock said.
A number of their friends haven’t been so fortunate. Just as they’re reaching typical prime home-buying age, they’ve seen inventories continue to stay tight — and get even tighter among houses in the lower-priced market — while watching mortgage interest rates essentially double.
“I’ve heard many gripes about how disappointed they are that they can’t afford the same house that we have … particularly first-time homebuyers who would ideally fit in like the ($150,000-$200,000) range. They’ve been priced out completely.”
What a difference two years has made
Nathan and Abigail Cachiaras weren’t thinking about homeownership after they finished graduate school in 2021. They loved their downtown Johnson City apartment and weren’t sure where they would be in five years.
Before long, the Cachiarases did know — Johnson City was the place for at least the indefinite future. That meant house hunting for Nathan, a pastor, and Abigail, who works from home in marketing.
As the clock ticked further into 2022, the couple saw several friends go through the first-time buying process in a hot market, with rising interest rates and prices. Inventory was still tight, especially in what now qualifies as lower price ranges (up to $200,000) and what is considered the “affordability range” (up to about $325,000).
“We were aware that every headline was how difficult it is to buy, and we did have some friends that bought in 2022, and we watched them put in offers with escalation clauses to try and beat out competitive bids,” Cachiaras said.
“That was all pretty intimidating because we could see the way that it was just really difficult and things had to move fast and decisions had to happen quickly.”
What the Cachiarases experienced anecdotally is backed up by data. Even people who haven’t been priced out are dealing with a much different landscape than the Peacocks did in early 2021. The Atlanta Federal Reserve Bank’s “Home Ownership Affordability Monitor” (HOAM) shows the median home price rose in the Johnson City metro; it increased 22% between April 2021, when the Peacocks bought, and January 2023 — from $198,712 to $241,667.
Because interest rates have more than doubled during that same period, a buyer’s monthly payment for a comparable home would be much more than 22% higher than two years ago.
Taken together, according to the HOAM statistics, that puts the total median monthly payment for a house in Johnson City, including taxes and insurance, at $1,600 — 34.9% of gross median income.
When the Peacocks bought, the median monthly total payment was $1,010 according to the HOAM index, which totaled 23.8% of median income. A payment of 30% or below is considered affordable.
That 58% increase in monthly mortgage cost has come as the median income in the metro area has risen by just 8%, from $50,891 to $54,996 annually. Whether they know the data or not, that’s a contrast that resonates with young people, Peacock said.
“They’ve moved one set of goalposts but not the other,” she said.
“Being able to bring up the actual salaries of the people who live here so that it is more affordable to us, that is something that I have heard many young people are concerned about,” she said. “The median wages of this area need to reflect the housing prices.”
For many years, they did. When the Peacocks bought, the Johnson City and Kingsport metro areas scored 126.0 and 134.3 on the HOAM index, with any figure above 100 being considered affordable and 100 equaling a 30% payment. That put the region in a much more comfortable position than the national average, which was 101.6 that same month of April 2021.
The national index dipped into unaffordability range in June 2021 and got as low as 68.6 last October. But Johnson City and Kingsport’s unaffordability have accelerated much more quickly. Johnson City’s reached 77.0 in September 2022, while Kingsport’s hit 79.4 a month later.
The trajectory grieves and irritates Peacock, who said she and her husband make significantly more than many friends due to working at a major corporate employer.
“It’s frustrating because I see my friends work extremely hard, work 70 hours a week, work like grueling hours at coffee shops and at churches and they just … can’t afford the same things. That is massively frustrating for me, who is a justice-oriented person.”
Taking the plunge
Buying a home is still possible, and it is happening for people with lower incomes than the Peacocks, but even the Cachiaras’s realtor said she understands how intimidating it is.
“I think buying a house right now takes courage,” Lois Masten said. “Not just courage to entering the relationship that you have (with a massive debt) but courage that you are going to be around to see this through.”
She said a long trend of very low interest rates makes 6 or 7% seem unreasonably high right now.
“We’re actually just getting normalized, which doesn’t help when you’re figuring, ‘ok, the house I want is $300,000 here,'” Masten said. “But there are still deals, there’s value out here. The problem right now is the inventory’s really low.”
She acknowledged the occasional affordable diamond in the rough can be cold comfort to young first-time buyers.
“What does that mean to young people wanting to get in, hard-working young people? Four out of my last five deals have been first-time homebuyers, all in their 20s and 30s, and it’s more of an education process.”
The Cachiarases took their time learning about the home-buying process and kept checking the market, receiving regular notifications from realtor.com “without ever quite putting a plan together.”
Then came a Monday night in early March when they saw a house they’d noticed 11 days earlier that dropped more than 10% off its asking price. Things moved quickly from there. By the end of Tuesday they’d gotten pre-approved for a mortgage, contacted Masten and toured the house in east Johnson City.
“Wednesday morning, we woke up and Abigail said, ‘I think we need to put an offer in on this house,'” Cachiaras said. “So that was a really surprising sequence that we had been sort of preparing for just by paying attention, even though we hadn’t taken a whole bunch of steps.”
Though the process has hit a slight hitch on the sellers’ end, the Cachiarases hope to close soon and haul their worldly possessions and their cat, Frodo, across town to begin their lives as homeowners.
They’ll be settling in with a 6.5% loan and paying 3% down. Their monthly payment will be a bit above what they’d pay in rent, but Cachiaras said some other expenses will decrease to make the transition essentially a wash.
Cachiaras encourages people to educate themselves about the homebuying process and that he has learned a great deal, including how many programs are out there to help first-time buyers who don’t have enough for a 20% down payment.
But he’s right there with Peacock in terms of his overall concern about affordability.
“Not everyone is able to have two incomes in their household or two full-time incomes,” he said. “That can be hard to find. We’ve got a lot of friends that are looking for work right now, so regardless of all other factors they wouldn’t be able to not just afford it, to consider it.
“It feels like folks should be able to live safely and make plans to be stable in a city. I want for our city to be a place where people can plan to live and plan to flourish and plan to enjoy their hobbies and their friendships and their community groups. And it feels like having affordable housing … affordable in a way that a single income could pay for a place to be, that’s something we ought to aim for.”