U.S. Housing Market Conditions, First Quarter 2003: National Data

Chattanooga, Tennessee
Between 1993 and 2000 total nonfarm employment in the Chattanooga metropolitan area increased at an average annual rate of 1.8 percent. More than half of the gains during this period resulted from growth in the trade, transportation, and utilities sectors. Chattanooga is headquarters to two of the nation’s largest trucking firms, US Xpress Enterprises and Covenant Transport, and employment in transportation and utilities during the period increased from 5,800 to 20,700 as a result of the trucking industry growth.

Since 2000 nonfarm employment has decreased each year for a total of 5,300 jobs. During the past 12 months nonfarm employment fell by 2,200, or 1 percent, compared with the preceding 12-month period. Manufacturing employment has been particularly hard hit by the recession. This sector fluctuated from a low of 41,300 jobs in 1997 to a high of 43,900 in 2000, but since 2000 employment has fallen by 7,000. Cutbacks in the chemical, textile, and iron and steel industries and growth in the services sector during the past 10 years have reduced manufacturing’s share of the total nonfarm employment by 24 percent, to 16 percent for the 12 months ending February 2003.

Employers who provide services such as those involved in insurance activities, including Blue Cross/Blue Shield of Tennessee, CIGNA HealthCare, Meristar, and UnumProvident Corporation, are increasingly important to the area’s economy. However, the current recession has affected this industry too, as employers scale back or eliminate medical coverage plans for their employees.

It is estimated that the population of the metropolitan area is currently 473,200, or an average annual rate of increase of 0.6 percent, since the 2000 Census. During the 1990s the population of the five-county Chattanooga metropolitan area increased by approximately 10 percent to 465,128. At the time of the 2000 Census two-thirds of the area’s residents lived in Hamilton County, which accounted for more than half of the decade’s population increase. Recent population estimates indicate, however, that most of the area’s population growth is in the suburban counties, particularly in northwest Georgia. Catoosa, Dade, and Walker Counties accounted for 77 percent of the area’s population growth between April 1, 2000, and July 1, 2002.

The Census Bureau reports that building permits were issued for 20,109 new single-family homes in the metropolitan area during the 1990s, with much of this activity occurring during the latter half of the decade. A total of 2,245 homes were permitted during the 12-month period ending March 2003, a 6-percent increase over the preceding period. The most active subdivisions in Hamilton County during 2002 were Hamilton on Hunter, Belleau Woods, Meadow Stream, and Stillwater. A 111-lot phase was recently announced for Hamilton on Hunter, bringing the total number for the subdivision to 677. Another large development currently under construction is Stonewall Farms, which is scheduled to include 400 homes.

Data provided by the Chattanooga Association of REALTORS^® indicate that strong demand and low interest rates resulted in a record number of home sales during 2002, totaling 5,570 homes, an increase of 10 percent. The median sales price for 2002 was $112,500, a 5-percent increase over 2001.

A total of 2,783 multifamily units were permitted in the metropolitan area during the 1990s, with more than half of the activity during the last 3 years of the decade. Low production levels in the early part of the decade were a reaction to the significant overbuilding that occurred during the latter half of the 1980s. The overall rental vacancy rate of 11.8 percent in 1990 reflected the large excess supply. The increases in construction activity during the latter half of the 1990s resulted in an overall rental vacancy rate of 9 percent (at the time of the 2000 Census) and a continued excess supply of vacant rentals.

An apartment survey conducted by the Community Research Council for the Chattanooga Apartment Association during the winter of 2003 recorded an overall occupancy rate of 94 percent in the approximately 4,500 apartment units surveyed. The average rent was $547, virtually unchanged over the past 6 months. The average rents for one-, two-, and three-bedroom units were $469, $564 and $632, respectively.

The city of Chattanooga has received national recognition for its downtown revitalization efforts, a principal component of which was the construction of the $45 million Tennessee Aquarium in the Ross’s Landing riverfront district. Since opening in 1992 the aquarium has drawn 1 million visitors a year. A $30 million expansion to the aquarium is under way with a target opening date of spring 2005. Also planned as part of Chattanooga’s 21st Century Waterfront Plan are public space improvements and private development activities. A request for proposals has been issued by the RiverCity Company, which is acting as the coordinating developer on behalf of the Chattanooga Downtown Redevelopment Corporation, to develop four mixeduse parcels. The four parcels are to include multistory buildings that have retail businesses on the ground floor and residences on the upper floors.

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