Buying into the Nashville Real Estate Market

The Nashville Residential Real Estate Market for 2008, 2009, and 2010

The Greater Nashville Association of Realtors (GNAR) released their monthly sales report last week. As expected, GNAR finds bright spots in the sales numbers. That is their job after all.

For example, there were 1612 homes sales in December 2009 compared to 1422 sales in 2008, representing a 13% increase. During the 4th quarter there were 5,730 closings in the region, which is a 29.8 percent increase over the 4,413 closings in the 4th quarter of 2008.

Of course, many of these sales can be attributed to the $8,000 tax credit being offered to first time home buyers. A "first time home buyer" is anyone who has not owned a home in the last three years, so many people were eligible to take advantage of this generous federal incentive. Since the credit was supposed to expire December 1st, st, there was a rush of home buyers trying to get in before the deadline. The net effect increased sales numbers, albeit often for less expensive (first-time buyer/entry level) homes.

As it turns out, no one really had to rush since the tax credit was extended - and even expanded. Now, in order to receive the $8,000 tax credit, the "first time home buyers" have until April 30th 2010 to put a contract on their new home, and until June 30th to close. However, this time, it's not just first-time home buyers who are getting into the action. If you have owned your home for five years or more and are moving to a new place, you are eligible for a $6,500 tax credit. (For complete information on the tax credits, click here).

Once again, this should stimulate some real estate activity through the first quarter of 2010. With so many home owners still struggling and the market in the doldrums, keeping the market on some form of artificial life support is probably necessary at this point.

The other (non headline) part of the GNAR report tells a less optimistic story. For example, if you step back and look at the entire year, there were 21,183 closings at year-end for 2009, which is 12.6 percent lower than the 24,246 closings for 2008. We are still in a down (buyer's) market and probably will be for some time.

One positive that I took from the report was pricing levels. The median residential price in December of 2009 was $164,000 and for a condominium the median price was $149,900. That compares with median prices of $163,750 and $132,062 respectively in December of 2008. Without reading too much into those numbers, that at least indicates some stability in the marketplace - and right now, that's a good thing.

So what to expect for 2010? Fortune Magazine (using Moody data) forecast a 6.36% decrease in homes values for Nashville in 2011 (followed by a minor increase in 2012). Personally, that seems overly negative to me, but the main drag on the overall homes values continues to be the number of foreclosures. Once those work their way through the system, we should see more stability and even appreciation. Ultimately, underlying the housing market is the economy and employment. When people feel better about their jobs and finances, they'll become better buyers and that will further support prices.

While it's tough to call a bottom, I think we are close - if not already there. There are truly great deals out there, so if you are thinking about buying, I would encourage you to go for it. Even if you have a place to sell, it may be worth it to test the market. Interest rates are ridiculously low and Congress was pretty clear that there won't be another extension of tax credits, so this should be 'it' in terms of government incentives.

This is not a market to make for a fast buck. I can't imagine another bubble for decade or more (and that's a good thing). As always, look to hold a property for at least five years in order to get your investment back. All that to say, if you are in a position to buy, this is probably as good as it gets. Be patient, do your research, and, of course, hire a good Realtor.

If you have any questions or would like more information, feel free to contact me at jeff@jefffulmer.com or at 615-545-8611. If you would like to see the entire GNAR report, click here.