The Nashville housing market is booming, according to multiple sources. The Greater Nashville Realtors recently reported that the market is doing well, with year-to-date closings up 4.2 percent at the end of October over the same period from last year. It’s expected that this year will be the best housing market Nashville has ever seen. The median sale price for a home is $289,900, a significant increase from 2016.
The past few years have seen significant activity in the region. Nashville has one of the better job markets in the county, as well as an unemployment rate of just 2.3 percent. Nashville’s strong job sector supports the booming housing market. It also boasts something else – affordability. Nationally, the average that most homeowners pay spend on their mortgage is 16 percent of their income. In Nashville, even though the cost of living is on the increase, the average is just 9 percent.
Economic Recovery Fuels the Housing Market
The Great Recession of 2008 affected housing in Nashville, not only because so many people went into foreclosure, but because there were so many job losses following the recession. A comprehensive housing market analysis by the U.S. Department of Housing and Urban Development reports strong gains in the nonfarm payrolls ending June 2014. Notable contributions to the job sector included Amazon.com Inc., Nissan North America, Inc. and Aramark Corporation which added more than 4,300 jobs in the area. Nashville also has a thriving tourist industry and has become a major center for healthcare. Both industries equate to jobs and opportunities for the Nashville area.
At the beginning of 2017, Nashville was at the top of the Zillow’s Top 10 Housing Markets, beating out Seattle and other cities in the western United States that are known for growth. Homes in the Music City are appreciating at 11 percent. Zillow reports a national appreciation value of 3 percent.
The market is quite healthy based on homes with negative equity or homeowners who are delinquent on their mortgage. According to Zillow, the national average for homes with negative equity is 10.4 percent, while Nashville’s rate is 7.0 percent. Only 0.9 percent of homeowners in Nashville are delinquent on their mortgage, compared with a national average of 1.6 percent. This suggests that there isn’t a housing bubble, as suggested by USA Today Network – Tennessee.
New Home Sales
Although Nashville has a strong housing market, new homes sales are growing at a slower rate. Metrostudy reported that the new construction housing supply inventory is up 10.3 percent from last year, but it shows a 17 percent decrease from the past quarter. The median new home price for a single-family detached unit in 2Q2017 was $349,900, which is at its peak. This could weaken the new homebuyer pool.
Another threat to the new home market is that “Nashville has one of the lowest supplies of vacant developed lots in the country.” It’s expected that supply will remain low throughout the end of 2017, but home builders have obtained nearly 5 percent more permits this year as compared to last. Edsel Charles market researcher with MarketGraphics, predicts a steady market for new homes until May 2020.” Most experts concur with his predictions, expecting perhaps a slight cooldown, but no major long-term downward trends where values depreciate.
It’s reported that the city has an abundance of depressed homes that could increase the number of lots available for new sales. However, many developers are building tall, skinny homes on a lot, making two homes where there used to be one. Many communities are concerned about these tall, skinny homes that maximize developer’s profits from a piece of property, but change the tone of the neighborhood.
Issues that Could Affect Nashville Homebuyers
Greater Nashville Realtors identifies that there are congestion and traffic problems in Nashville, which are affecting the choice of homebuyers to make their home in the area. Transit for Nashville estimates that the city is growing by 100 people per day and working to create a transportation system that alleviates traffic congestion, but it’s still years in the making should the proposal go through.
Another issue facing homeowners is proposed tax reform with places limits on the use of the Mortgage Interest Deduction and reverses other incentives for homeownership. Greater Nashville Realtors are concerned that the current proposals may slow home sales, but are lobbying to protect homeownership.