Hadley HitsonNashville Tennessean
Consider this: Nearly 70% of Nashville's ever-changing skyline wasn't there 10 years ago, according to Chamber of Commerce Chief Economic Development Officer Jeff Hite.
As skyscrapers went up, the area added over 296,000 jobs, upped its gross domestic product to account for about 40% of the entire state of Tennessee's GDP and completely transformed its real estate market.
"People who have been in the business for a long period have seen just astonishing growth here in the Nashville region," National Association of Realtors Chief Economist Lawrence Yun said. "But if you just look at the past couple of years, it's been more competitive, less inventory out there and more difficult circ*mstances."
Yun, Hite and other community and industry leaders presented their outlooks on local real estate trends Thursday at the 2024 Nashonomics Greater Nashville Realtors conference at Trevecca University.
For the last three years, Nashville has been ranked the top overall real estate market in the nation, according to the Emerging Trends in Real Estate study by the Urban Land Institute and PwC, beating out places like Austin, Miami and Seattle.
Still, mortgage rates are hitting 20-year highs, middle class families are being priced out of home-buying in previously attainable neighborhoods and available inventory is not meeting the demand for homes.
Now, here's the latest forecast:
Nationwide home sales decline, but rise in Nashville
National Association of Realtors data shows that, by the end of 2023, home sales dropped to the lowest they've been since 1995.
"To say that the figure is that low somehow does not make logical sense, especially considering that we have a widening population in the U.S.," Yun said. "In fact, if you compare today's population to 1995, there are 70 million more people living in the country."
He said there is likely a "pent up demand" for homebuyers nationwide — people who want to purchase homes but are waiting for mortgage rates to drop or more inventory to become available.
“In recent months, we’re seeing some recovery in the consumer sentiment of home buying,” Yun said. “We’re simply coming out of the grave.”
In Nashville, though, that recovery happened much more quickly. According to an April report from Greater Nashville Realtors, the area saw an 11% increase in closings compared to the year before. However, the number of pending sales was down 6%.
"You are doing much better than the rest of the country," Yun said. "We're not fully out of the recovery stage, so maybe you'll be a little bumpy."
Many residents are moving to the suburbs to afford houses
Statewide, home prices jumped 60% since the COVID pandemic, according to Yun, and that includes the capital city.
In April, the median price for residential single-family homes in Nashville was more than $500,000 for the first time.
Mayor Freddie O'Connell said the high cost of living emphasizes the need for better transit.
"For our transportation initiative, 92% of respondents said they couldn't afford to buy a house in Davidson County, and so they're starting to look elsewhere," O'Connell said Thursday. "In fact, since the most recent census, we, as a city and county, have treaded water with population. Based on data, we've lost a net 3,725 people to other places, many of them in the region and surrounding counties.
"It's not a huge change, but it's not population growth."
He pointed out that high interest rates lead to people moving further and further away from the city in search of lower prices.
"Residents are pushing deeper into the suburbs," O'Connell said. "That is not a good strategy. People who still live in Nashville are increasingly asking us to reconsider what our own success looks like."
O'Connell noted several other issues that have followed the city's growth, including a poverty rate that is higher than the national average and insufficient transportation infrastructure.
He said his top priorities are reducing the cost of living and enhancing the quality of life in Nashville.
Temporary oversupply could lead to dropping cost of rent
Yun said rent is rising nationwide at a rate of about 5.7%, but he expects the costs in Nashville to fall in the coming months.
"Don't be surprised when some of the apartment owners are saying: 'You know what? I have to reduce my rent a bit,'" Yun said. "Yeah, people are moving in, but there has been so much construction of apartments. There's a temporary oversupply."
He said apartment construction is at a four-year high, but vacancy rates are also up. Yun added that cities like Charlotte and Atlanta are experiencing the same oversupply.
A 6% interest rate may become 'normal'
Yun thinks the Federal Reserve will likely cut interest rates later this year or in early 2025 at the latest.
He also said a 6% interest rate could be "the new normal."
"With inflation moving better, it's almost inevitable that the interest rate will be declining," he said. "They are saying consumer price inflation is trending in the right direction."
Appraiser says not to expect home prices to fall anytime soon
Clint Walker, an appraiser with AppraiserPool.com, was asked a simple question at the end of one of Thursday's panels: "Do you see home prices declining?"
To that, he gave a matter-of-fact answer: "No."
The National Association of Realtors recently agreed to eliminate automatic commissions, and in a news release, said one effect would be decreased costs for home buyers.
But Walker said this isn't necessarily the case.
"I don't think it's going to affect sales prices," he said. "It won't affect appraised values unless the commissions just stop being customary at all."
Hadley Hitson coverstrending business, dining and health care for The Tennessean. She can be reached athhitson@gannett.com. To support her work,subscribe to The Tennessean.
