Think about it this way. According to Jeff Hite, the chamber's chief economic development officer, nearly 70 percent of what he calls Nashville's ever-changing skyline didn't exist 10 years ago.
With the construction of high-rise buildings, the region has added more than 296,000 jobs, increased gross domestic product to approximately 40 percent of Tennessee's overall GDP, and completely transformed the real estate market.
“Those who have been in this business for many years have seen incredible growth here in the Nashville area,” said Lawrence Yun, chief economist at the National Association of Realtors. “But if you look at just the past few years, competition has increased, inventories have declined, and things have become more difficult.”
Yun, Hite and other community and industry leaders presented their outlook on local real estate trends Thursday at the 2024 Nationalomics Greater Nashville Realtors Conference at Trevecca University.
For the past three years, Nashville has ranked as the nation's top overall real estate market, ahead of cities such as Austin, Miami and Seattle, according to new real estate trends research from the Urban Land Institute and PwC.
Still, mortgage rates have reached 20-year highs, middle-class households are no longer able to purchase homes in areas where they were previously able to do so, and available inventory is not meeting housing demand.
Well, here are the latest predictions.
Home sales nationwide fall, but rise in Nashville
By the end of 2023, home sales had fallen to their lowest level since 1995, according to data from the National Association of Realtors.
“It doesn't make logical sense to say this number is that low, especially given that the U.S. population is growing,” Yun said. “In fact, if you compare the current population to what it was in 1995, there are 70 million more people living in this country.”
He said there is “pent-up demand” among homebuyers across the country, people who want to buy a home but are waiting for mortgage rates to drop or more inventory to become available. He said it is likely.
“In recent months, we have seen some recovery in consumer sentiment toward home purchases,” Yun said. “We just came out of the grave.”
But in Nashville, that recovery happened much faster. According to his April report for Greater Nashville Realtors, closings in the area increased 11% year over year. However, the number of pending sales decreased by 6%.
“You are doing much better than the rest of the country,” Yun said. “He's not fully out of the recovery phase yet, so he might be a little unstable.”
Many residents are moving to the suburbs to buy homes.
Since the coronavirus pandemic, home prices across the state have increased by 60%, including in the capital, Yun said.
In April, the median single-family home price in Nashville exceeded $500,000 for the first time.
Mayor Freddie O'Connell said the high cost of living highlighted the need for improved transportation.
“When it comes to our transportation initiatives, 92 percent of respondents said they can't afford to buy a home in Davidson County, so they're starting to look elsewhere,” O'Connell said Thursday. “In fact, as a city and county, we have faced population growth since the most recent census. Data shows a net 3,725 people have migrated elsewhere, many in and around this region. It's in the county.
“It’s not a huge change, but it’s not population growth.”
He pointed out that high interest rates push people further and further away from cities in search of cheaper prices.
“Residents are pushing deeper into the suburbs,” O'Connell said. “That's not a good strategy. People who still live in Nashville are asking us to rethink what our own success looks like.”
O'Connell also cited several other problems with the city's growth, including higher poverty rates than the national average and inadequate transportation infrastructure.
He said reducing the cost of living and improving quality of life in Nashville is a top priority.
Temporary oversupply may lead to a fall in rents
Yoon said while nationally rents are increasing at a rate of about 5.7%, he expects rents in Nashville to fall in the coming months.
“Don't be surprised if some apartment owners say, 'You know what? I have to reduce my rent a little bit,'” Yun said. “Yes, people are moving in, but there is so much apartment building that there is a temporary oversupply.”
He said apartment construction is at its highest level in four years, but vacancy rates are also rising. Yun added that cities like Charlotte and Atlanta are experiencing similar oversupply.
6% interest rate may become “normal”
Yun believes the Fed is likely to cut rates by the end of this year or early 2025 at the latest.
He also said 6% interest rates could become the “new normal.”
“With inflation trending upward, it is almost inevitable that interest rates will fall,” he said. He says “consumer price inflation is moving in the right direction.”
Appraisers said they don't expect home prices to fall anytime soon.
AppraiserPool.com appraiser Clint Walker was asked a simple question at the end of Thursday's panel: “Do you think home prices are going down?”
To that, he simply replied, “No.”
The National Association of Realtors recently agreed to eliminate automatic commissions and said in a news release that one effect would be to reduce costs for homebuyers.
But Walker says that's not necessarily the case.
“I don't think it will affect the selling price,” he said. “Unless the fee customarily disappears altogether, it will not affect the valuation.”
Hadley Hitson cover Trending business, dining, and healthcare for Tennesseans. Contact her at hhitson@gannett.com. To support her work, subscribe to The Tennessean.
