The Nashville-area real estate market started to slow down a bit at the end of June.
Single-family homes in the $200,000 to $300,000 range were starting to stay on the market as long as three, sometimes four days.
OK, that’s hyperbole, but not much.
Nashville’s loony housing market isn’t unique. It’s happening all over the country as America thaws from the COVID-19 freeze. Would-be sellers held back during the pandemic. Record low interest rates designed to goose the economy drew in more buyers, who were already thinking about purchasing a first home or upgrading after spending all that time cooped up in their old one. Builders aren’t building nearly as much as they once did, and even if they wanted to, the soaring cost of lumber and other material makes it a poor revenue play anyway. (Though lumber futures, thankfully, are starting to correct; so no, you can no longer use that as an excuse for why you haven’t started fixing your deck.)
The United States is now in the bizarre situation of having more real estate agents than homes to sell. And in Nashville, the number of home closings is higher than the number of remaining homes on the market. Typically, experts say a market is healthy and balanced if there’s a six-month supply of homes — that is, inventory is six times higher than closings in a month. In May, there were 3,214 closings in the greater Nashville area. That left 2,557 homes on the market, or a 24-day supply. Nashville’s market has been operating below the six-month threshold for a while — usually in the two- to three-month range — but never has it been so tight.
One veteran local buyers’ agent tells the Scene she apologizes to house-seekers when they come to her with preapproval in hand and the American Dream in their sights.
“I’m embarrassed by the market,” she says. “It’s absolutely embarrassing.”
Agents tell the Scene the same horror stories: solid offers usurped by cash; offers submitted before showings; arranging showings the instant a home hits the market only to find out it’s under contract the same day; sellers’ agents calling for best and highest offers after just 48 hours.
Nashville’s housing market has been hot for years, though it’s been confined to certain neighborhoods. Stories of cash offers $30,000 over asking price in East Nashville are well-worn by now. What nobody could have foreseen was the same thing happening in places that weren’t featured prominently in coastal magazine lifestyle pieces — like say, Bordeaux or Antioch.
The population influx, coupled with the area’s relatively affordable housing costs — the median price of a home sold in the greater Nashville area in May was $400,000, one of the highest figures in years, but still 45 percent lower than Los Angeles — means that in-movers come armed with cash. With no need to finance, it’s easy enough to waive all the usual contingencies banks require, like inspections or appraisals. Even buyers planning on a mortgage are willing to sidestep all the usual guardrails that help keep the housing market relatively sane.
“Even if the home doesn’t appraise [at the agreed sales price], they don’t care,” another agent tells the Scene. “They’ll make up the difference in cash.”
Fundamentally, that means homes are selling for more — sometimes far more — than banks think they’re worth. But people are so desperate for a home, they’re willing to take on all the risk themselves rather than sharing that risk with a lender, as is standard practice. And with surging prices and new home construction unable to catch up with demand, who can blame them? They’ll be in equity far faster than the five to seven years that’s been the rule of thumb for decades.
Those suffering the most are buyers on the lower end of the market, particularly those buying for the first time. Many first-time homeowners rely on mortgages backed by federal programs — either the Federal Housing Authority or the Department of Veterans Affairs — because these loans require a lower down payment (or in the VA’s case, none at all) and have other perks designed to help people own real estate and, therefore, build long-term wealth. The downside is that the FHA and VA have very specific home-inspection requirements, which are more stringent than those of a conventional mortgage. In essence, it’s virtually impossible for a would-be buyer using government-guaranteed financing to waive appraisal or inspection and still get their loan.
In Davidson County in June, there were 311 homes sold that were originally listed between $200,000 and $300,000. Of those, 235 — about three-quarters — sold after a week or less on the market. On average, those 235 homes sold for $8,819 more than the asking price. Only 24 of those homes sold at or below their listing price.
The waters calm with time. The 25 percent of those mid-priced homes that lasted longer than a week in June? They sold for, on average, $4,700 less than list.
Of course, that’s self-evident. The more desirable homes in the hotter neighborhoods are more likely to prompt bidding wars. Owners of homes that have languished on the market for a few months — though such a waiting period was once the norm — are more likely to take a lowball offer.
The good news, agents tell the Scene, is that things seemingly began to calm down in the last few weeks of June after the febrile spring, setting Nashville up to have a merely rapid market rather than one set at ludicrous speed.
