By James Crawford
Nationally, home prices have mostly outpaced broader consumer inflation over the past decade. This is certainly the case in Nashville. From 2010 to mid-2020 the median home price rose 61% nationally. The key reason: steadily shrinking supply coupled with steadily rising demand. Americans saw inflation of 18% and a wage hike at 30% over the same 10-year period. Yet incredibly, the percentage of income devoted to a mortgage principal and interest payment to buy a median price home is essentially unchanged, reflecting the awesome power of low mortgage rates which hit an all-time low in August and may fall even farther.
More amazingly, in the midst of a pandemic and high unemployment, home prices are setting new heights, with multiple offers seen in many properties. The rate of home sales, after plunging during the shutdowns, is poised to surpass 2019 levels in the final months of the year.
Could there be a downside to these rock-bottom rates? While it’s not something to worry about until 2022 or beyond, some homeowners will stay put longer than they might have as they’re disinclined to trade the lower rates for a higher one in a new place. When rates do go up, however, it likely won’t deter those who want to move to a different home.
In some markets, we are seeing a trend toward a desire for more space and larger homes in the suburbs or farther out in more affordable, smaller towns or places with attractive public schools. Even after the pandemic is behind us, it’s likely that many workers will continue to work from home so a demand for housing that can accommodate a home office (or two) is likely to remain high.
In Middle Tennessee, this has not translated into a slow down or an exodus from the city. Even potentially higher property taxes don’t seem to be dissuading buyers from purchasing in our popular urban neighborhoods. Though single-family homes are outpacing the condominium market, townhouses are still a popular option, especially for first-time buyers, and even investors.
What kind of market will 2021 bring? It may be impossible to estimate until we see the result of the presidential election. It’s true that elections do tend to slow down the fall market every four years as buyers and sellers feel stress and begin to question their decisions. But analysis shows the normal November dip will all but vanish when looking from a wider view. We suspect that pent up demand will keep the local economy buzzing despite the election or any potential property tax changes.
We do expect to see a flurry of activity in the coming spring, probably around Valentine’s Day. The aforementioned pent up demand will likely bring both buyers and sellers out earlier than normal as they decide to pop their heads above ground after winter’s thaw. After so many seasons of keeping a low profile, many will be ready for a change. The recent epidemic of low-inventory may give way to wild west conditions as continuing low-interest rates should keep a strong supply of buyers standing by ready to pounce.
No one can predict the future, but all the indicators are pointing toward a healthy and exciting market in Middle Tennessee for 2021. If you’d like to discuss your next home sale or purchase, we’d love to chat.