Ghosts of Houses Past, Present, and Future: A Nashville Real Estate Carol
Nashville real estate has seen some incredible shifts in the past few years, especially in the past 12 months. "The times, they are a-changin’," as the classic Bob Dylan song goes.
If you're trying to make decisions about buying or selling a home, these big shifts raise big questions. Will there be a crash? A slowdown? A softening? When will buyers get a break?
While no one can predict the future, looking at where we've been can tell us a lot about where we're going. In nature, nothing stands still; the tide comes in and out and the seasons change year after year. Real estate, like nature, has a cycle and it's helpful to consider this natural rhythm when trying to answer big questions like the ones above.
So let's look back at where we've been in 2022, where we are now, and where we might be going in 2023 in this 2022 end-of-year wrap up!
Where We Were: Q1-Q3 of 2022
Quarters 1 and 2 are traditionally a quiet time for home buyers with freezing temperatures, icy roads, and snow days. This year, however, it was unseasonably sizzling hot for real estate. Extremely low inventory for entry-level first time homebuyers created a brutally competitive market. The unprecedented increase in home prices over the last few years (22.4% in 2021) and, as the year progressed, rising interest rates left many first-time house hunters priced out of the market. Like so many buyers in Nashville and across the US, two of our buyer clients abandoned their home search after being repeatedly outbid by aggressive all-cash buyers.
Here is what buyers, sellers, investors and realtors experienced in early 2022:
Super low inventory
Americans faced continued economic uncertainty due to the Covid-19 pandemic
Multiple offers on median priced homes became the norm
Homes going under contract in less than 1 week became the norm
Homes frequently closed in less than 30 days
Hot competition from all-cash buyers
Offers were often 10-15% over list price
Many buyers offered big concessions to land a house, including forgoing inspections
The break-neck pace of the market left buyers little time to consider big decisions
Historically low interest rates in Q1 and 2 began to give way to rate hikes in Q3 in an effort to curb inflation
Where We Are: Q4 of 2022
The white hot sellers market of early 2022 has now cooled off considerably. Rising interest rates intended to combat inflation have impacted the real estate market - and some say it’s a good thing. The continual, astronomical increase in home prices is unsustainable and has priced many Americans out of owning or even renting a home. Following its November meeting, the Federal Reserve confirmed that interest rates will continue to rise into 2023, though at a slower pace.
Here’s what buyers, sellers, realtors and mortgage lenders are currently experiencing in Q4 2022:
Inventory was up 92% in October 2022 compared to October 2021 giving buyers more choice and bargaining power
Covid-19 continues to create uncertainty, but vaccines have allowed the world to return to some kind of normalcy
Homes are taking longer to sell
More buyers are pausing or choosing not to start their home search
Sellers are receiving fewer offers with less competition between buyers
Buyers are able to take more time making decisions
Sellers are making more concessions
Price reductions are becoming more common
Home prices are rising at a slower pace
Nashville is experiencing record population growth - the average age of Nashville residents is 33, compared to the national average of 40
Interest rates continue to rise
Where We're Going: 2023
Here in Nashville, the last 12 months have been a wild ride for buyers, sellers, investors, realtors and mortgage lenders. Some are saying we're finally entering a buyers market as the housing market shows more and more signs of softening. But is this true?
“They’re comparing this year to last year. I mean, the last year was the greatest real estate market that Nashville is ever going to see and has ever seen. So, comparing anything is really not a fair comparison. And when you do, sure, it’s a lot slower than it was last year,” says Steve Jolly, President of Greater Nashville Realtors.
As inventory becomes more balanced, new buyers are being drawn to the market. Despite rising inventory and decreased demand due to rising interest rates, it’s still an unpredictable market. Nashville continues to have a shortage of affordable single-family homes, which will only grow more severe as Music City continues to attract new residents. According to experts, it could take 10 years of solid building to balance supply and demand.
Here’s what we are likely to experience in the next 6 months according to my crystal ball and a good look at the market conditions:
Demand will continue to drive growth in Nashville's real estate market
Nashville's population will continue to grow as the city continues to draw new residents
Interest rates will continue to rise in an effort to curb inflation
Inventory will remain low, particularly for entry-level/starter single-family homes
Buyers will be more reluctant due to market uncertainty and rising interest rates
Moving towards a more balanced market which is 6 months of inventory. It’s still under 60 days
Home price growth is forecast to decline by 4% in the next 12 months and will continue to fall into 2024; some financial experts predict a peak to trough decline of 7% in US home prices
Buyers will have more time to make wise real estate purchase decisions and more options to choose from
Some homeowners may experience pressure from rising interest rates and may be forced to either sell or even foreclose
Some market experts predict an uptick in foreclosures
Rising interest rates will also cause rents to rise, further squeezing potential buyers
2022 was a rollercoaster of changes, but this end-of-year wrap up represents my balanced, non-hyped summary of what's currently happening in the real estate market right now and what experts believe we could realistically expect to see in the coming 6-12 months. After reading this, you may be wondering how to decide when to buy or sell a property as either a new home or investment - especially with so much uncertainty ahead. While market forecasts can be helpful when making a big decision, your unique wants and needs are the most important factors to consider.
Get In Touch Today to Start Your Real Estate Journey
Do you need to move for work or family? Do you need to downsize? Do you want to start paying towards your own mortgage rather than your landlord's? Have you been dreaming of owning an income property? If your answer to any of these questions is yes, then now is the right time to reach out me to get the ball rolling!
Wishing you and yours bright and happy holidays!
Peace Love and Real Estate,
Zelda Sheldon