Downtown Nashville Residential Statistics and Trends

Scroll down to see the 2011 Nashville Downtown Partnership’s research and trend analysis for residential and retail use in downtown Nashville. Many will be surprised by the fact that downtown only offers a total of 3,823 residential units, both rental and ownership. This is an incredibly small number considering the fact that Nashville maintains a 1.6 million MSA population. To put this number into perspective, the 2010 average attendance for a Nashville Sounds minor league baseball game was 5,000. Dissenters will tell you it’s because there’s nothing to do in downtown, that only tourist go downtown at night. They’ll say things like: “you can’t really walk to the grocery store” and “what are you supposed to do if you don’t go to bars?” Let’s put some perspective on these common assertions.

Ten years ago, the above assertions were true. I’ll also concede that downtown development is truly in its infancy. Most don’t realize that downtown residential development was forbidden by metro building codes from 1963 until 1993. Developers who would have otherwise built in downtown were forced to matriculate to the suburbs. It was not until then-Mayor Phil Bredeson created an incentivized urban redevelopment zone around the CBD that residential and retail development began in earnest. If it were not for the so called “Bredeson Box”, residential development in the urban core may still be non-existent. But Mayor Bredeson did kick start development and since 2000, public-private investments in new downtown development have exceeded $2.8 billion. There are 2 downtown grocery stores, 2 dry cleaners, 2 pharmacies, 5 museums, 4 dentists, 9 bakeries, 20 art galleries…and more retailers moving downtown every week. It’s hard to maintain an aversion to downtown Nashville when so much growth is taking place.

Downtown Nashville Residential and Retail Presentation

Note: The absolute numbers in this presentation are a moving target and subject to change. New residents and retailers are moving downtown every day. Big thank you to Tamara Dickson for the use of the Partnership’s presentation!

Nashville Receives High Forbes Magazine Ranking

nashville country music city marathon

nashville country music city marathonNashville, TN is the 5th most affordable city in America, according to a Forbes study released last week.

The financial magazine looked at cost of living (where Nashville ranked 3rd among cities with at least 100,000 residents), unemployment (Nashville ranked 23rd) and housing costs as a percentage of household income (Nashville ranked 11th).

The Forbes study surveyed all cities with MSA populations greater than 100,000. I usually hate polls like this because they seem to lack more than one aggregate fact, but when I Wikied the number of cities with a metropolitan statistical area greater than one hundred thousand, I found 342 and became a slight bit more optimistic for the future of Nashville.

Top Ten Most Affordable Cities in the United States

1) Oklahoma City: Cost of Living #12, Unemployment #4, Housing cost #2
2) Pittsburgh, PA: Cost of Living #6, Unemployment #15, Housing cost #1
3) Buffalo, NY: Cost of Living #16, Unemployment #9, Housing cost #3
4) Rochester, NY: Cost of Living #25, Unemployment #1, Housing cost #8
5) Nashville, TN: Cost of Living #3, Unemployment #23, Housing cost #11
6) San Antonio, TX: Cost of Living #19, Unemployment #9, Housing cost #10
7) Houston, TX: Cost of Living #7, Unemployment #22, Housing cost #13
8 ) Louisville, KY: Cost of Living #2, Unemployment #37, Housing cost #4
9) Birmingham, AL: Cost of Living #4, Unemployment #26, Housing cost #14
10) Austin, TX: Cost of Living #15, Unemployment #6, Housing cost #25

Does this Affect Nashville Real Estate Values?

I have long debated both myself and others on whether or not these overnight polls and studies truly possess any predictive value and I have come to one singular conclusion. By themselves, no. No matter the source. In aggregate, yes, especially when a mass public media collectively grabs hold of the headline and incessantly beat it in our subconscious. In the case of this Forbes study, that was not its fate, but I post here on my blog as a curiosity, and perhaps, a beginning of a trend.

Nashville Area Home Sales Up 15.5% June 2010

nashville area homes sales

nashville area homes salesJune marks the 9th consecutive month of increased homes sales. There were 2,416 homes sold in the month of June, according to figures provided by the Greater Nashville Association of REALTORS®. That figure is up 15.5 percent compared to the 2,091 closings reported for June 2009.

Second-quarter numbers are also up, with 6,831 closings reported, a 24.7 percent increase from the 5,478 closings reported through the second quarter of 2009. Year-to-date closings for the Greater Nashville area are up 19.3 percent with 11,023 compared to the 9,240 closings reported through mid-year 2009.

“The current home sales data for Greater Nashville and Middle Tennessee show encouraging signs for our market,” said GNAR President Lucy Smith. “For the ninth consecutive month we have seen an increase in home sales and every county saw home sales growth through mid-year. More good news is that Congress passed an extension of the Homebuyer Tax Credit closing deadline. This legislation gives many Middle Tennesseans an additional 90 days to complete their transactions. Originally, buyers under contract by April 30 needed to close by June 30 to qualify, but now have until Sept. 30 to close on their transactions. And, as interest rates remain remarkably low, now is a great time to explore the possibility of homeownership.”

A comparison of sales by category for June

                                      June 2009           June 2010
Total Closings              2,091                     2,416
Residential                   1,770                     1,980
Condominium              234                         354
Multi-Family                   21                           19
Farms/Land/Lots         66                            63

A comparison of sales by category for the second quarter

                                           Q2 2009              Q2 2010
Total Closings                  5,478                    6,831
Residential                       4,601                     5,732
Condominium                  642                        824
Multi-Family                       49                          58
Farms/Land/Lots             186                        217

A comparison of sales by category for mid-year

                                      Y-T-D 2009          Y-T-D 2010
Total Closings               9,240                     11,023
Residential                     7,750                     9,194
Condominium               1,088                      1,336
Multi-Family                     97                           109
Farms/Land/Lots           305                         384

The median residential price for a single-family home during June was $181,312, and for a condominium it was $145,000. Last year’s median residential and condominium prices for June were $177,700 and $152,870, respectively.

There were 1,976 sales pending at the end of June, compared with 2,141 pending sales at this time last year. The average number of days on the market for a single-family home was 83 days. Inventory at the end of June was 23,640, down slightly from 24,552 in June 2009.

Current inventory of properties compared to last year

                                      June 2009       June 2010
Inventory                          24,552             23,640
Residential                     15,035             14,775
Condominium                2,568                2,398
Multi-Family                      401                   395
Farms/Land/Lots            6,548               6,072

“Inventory is down slightly in all categories,” added Smith. “But, with a 10-month supply of homes, buyers still have plenty from which to choose. The Greater Nashville real estate market remains healthy and we are optimistic families and others will continue to make Middle Tennessee home.”

The Greater Nashville Association of REALTORS® is one of Middle Tennessee’s largest professional trade associations and serves as the primary voice for Nashville-area property owners. REALTOR® is a registered trademark that may be used only by real estate professionals who are members of the National Association of Realtors and subscribe to its strict code of ethics. ©Copyright 2007-2011 GNAR.

Nashville Real Estate Closings Up, Pendings Fall

historic nashville home sales and pending sales

If you were one of those drum beating, forever optimistic, ‘buy now or miss the deal of a lifetime’ type of real estate agents, this is what you might spin this month: Nashville home sales up an astounding 25.8 percent in May. You may also write: Year-to-date Nashville closings are up 20.4 percent through the same period last year. Don’t wait to buy, you’ll miss the best deals.

Of course, you would be correct, but you’d also be misleading your readers.

If you were one of those gong ringing, forever pessimistic, ‘I need to sell some more papers before they eliminate more positions’ type of journalist, this is what you might spin this month: Nashville pending home sales plummet an astounding 15.2% in May. You may also write: As tax credit expires, so do immediate hopes of a Nashville real estate recovery.

Of course, you would be correct as well, but you’d also be telling half truths.

Certainly, there is a happy middle ground between both ‘fictional’ postulators, but the truth is, both are correct in their own respect. Let’s take each one and dissect their intent:

In the first fictional example, this real estate agent is pointing out the well corroborated fact that Nashville real estate closings climbed from 1,723 in May 2009 to 2,168 in May 2010. What he/she fails to mention in their headline is that this 25.8 percent increase is a year-over-year increase. This person more egregiously fails to mention that this increase is directly attributable to the conclusion of the federal tax credit the previous month. Moreover, this person also fails to mention that the month-to-month increase from April 2010 to May 2010 is only 5.5 percent, which is below the majority of accepted estimates. Shame, shame fictitious person. You are a capitalist who is attempting to augment your income by creating optimism and selling more homes.

In the second fictional example, this journalist is musing about the same phenomenon, but from the other side of the coin. Naturally, in the months leading up to the conclusion of the federal tax credit, more and more buyers executed purchase contracts. These are buyers who are most likely pushing up their purchases in order to remain eligible for the $8,000 from Uncle Sam. Once our generous uncle retracted his $8,000 offer, there was no reason to push a purchase up in time and the market returned to its normal state. So, did pending sales fall 15.2% in Nashville? Yes, they did. They fell from a 21-month high of 2,505 pending home sales to 2,124. Shame, shame fictitious person, you are a capitalist who is attempting to augment your income by creating fear through sensationalism and selling more papers.

Closed Real Estate Sales                                             Pending Real Estate Sales

may 2010 closed real estate sales nashville      may 2010 pending sales nashville

Is there any Truth in Real Estate?

There is, but only if you block out all of the noise. You need to consider long term trends instead of micro-analyzing the short term phenomenon. Once you understand the trend, you can then use microanalysis as one of many tools to determine whether or not this is a good time for you to buy or sell real estate.

Who here did not expect home sales to dramatically increase in the months leading up to the end of the federal tax credit? Especially when compared to last year’s home sales numbers? Of course you did. You understand that this was a stimulus program intended to create just such an effect.

Who here did not expect home sales to drop off after the tax credit ended? All rational people expected this to happen. There is no surprise. This is not headline worthy news, at least, not yet. Time needs to pass before we can draw any concrete conclusions about the effectiveness of this last housing tax credit.

Trust in long term Nashville real estate trends

8 year pending vs. sold analysis                        Past 24 months pending vs. sold

historic nashville home sales and pending sales             pending home sales compared to closings in nashville

Of course, who cares about the velocity of sales, you just want to know about prices. Did you catch my research on Nashville home prices?

Proving a Housing Price Increase in Nashville

nashville home prices and closing volume

A very astute investor once told me that if I attempted to micro analyze the real estate market based upon short-term data, I would most likely be missing the soul of that market. Yes, I had the ability to make profitable short-term decisions, but I would lack the true understanding of why my short-term decisions were valid. It is this soul of the market that allows one to make accurate predictions and gain a certain comfort level with the velocity, momentum and overall direction of that market. He suggested that if I were to place a long horizon chart on the far side of a room, I would gain the perspective needed to feel at ease with any purchase or sale decision. I took his advice to heart and, ever since, I have been doing just that. But, I have never shared any of these charts on my website until now.

nashville home prices and closing volume

This weighted average mean price compared with volume of sales study of the local Nashville real estate market is one of my favorite charts. If you believe that the volume of closed transactions is an accurate leading indicator for price, as I do, you will see that the Nashville market is most likely entering into a sideways period for the next 12 months. Based upon an 18 month lead variable, it does appear that home prices in the Nashville market will officially recover in May of 2011. This will be the point at which one can say home prices in Nashville are now appreciating on the whole. However, let me caution buyers, if you try to time the bottom, you’ll almost always miss it.

Timing the Bottom of the Nashville Market

Should the national economic landscape not change in some drastic way, from this point forward, you should assume that the average Nashville property is at or near its bottom price. Keep in mind that we are speaking in averages, there are micro markets within Nashville that will continue to depreciate and markets that continue to appreciate independent of the average. If you are attempting to time the bottom of the market, now is the time to truly put forth effort in identifying submarket value deals. My advice is to plan on consummating your purchase prior to the end of this year. Perhaps, our traditional market doldrums of the Thanksgiving season might be the optimal convergence of seller depression and average price lows. That being said, should you identify a property that is currently under market value, do not delay long as a growing number of savvy buyers are beginning to exit their perches on the fence.

Volume of Real Estate Sales in Nashville

It is already clear from April’s numbers that the closing volume will be significantly higher in Q2 2010 than it was in Q2 2009. Granted, this is mostly an artificial result created by the federal real estate tax credit, but that point is entirely moot in this analysis. Provided that no new real estate stimulus programs be created in the near future, the Nashville market should experience its usual Q3 and Q4 volume declines and return to a very steady market in 2011. Nashville will continue to see modest gains in transactional volume throughout 2011, leading to modest gains in the average home pricing.

Predicting Median Prices of Nashville Real Estate

All of you day traders probably saw this trend immediately upon glancing at the above chart: you saw the bull run on prices from the middle of 2007 through the middle of 2008 while there was a very bearish volume of transactions. This was the period in Nashville before we really felt the “what, me too?” effect of the national housing crisis. Directly after that period, Nashville experienced a year of almost geometric price decline that began to temper just 12 months ago. This period of price decline almost perfectly mirrors the price increase realized in the 2005 period. Since that decline, prices in Nashville have remained virtually flat. I would expect this relatively flat, or even slightly declining period to continue through the remainder of 2010.

By the beginning of 2011, the market will begin to feel a lot like it did in 2003 – 2004 on a volume consistent with 2002 – 2003 (think of a reverse climb back up the same moving average trend line). Prices in the more desirable areas of Nashville will begin to appreciate as much as 5% per annum and even the least desirable areas will experience price stabilization to a certain extent. By the end of 2011, most city leaders, bankers, prognosticators and soap box salesmen will proudly declare an end to the economic downturn, but they will be early in that declaration. The economy still has a ways to go at this point, but the consumer confidence factor will have returned to the residential real estate market in Nashville. It will be during 2011 that Realtors will be able to say that their 4.5 year trip down the rabbit hole has finally ended.

April 2010 Nashville Real Estate Market Analysis

median price nashville housing market

nashville housing market statsThe Middle Tennessee MLS (Realtracs) has reported April 2010 housing statistics. The following graphs and analysis are based on the greater Nashville residential single family homes and condos market only. Note: on April 30, the federal housing tax credit for first-time home buyers culminated giving rise to purchases that may have occurred later in the housing cycle.

Total Inventory (Okay, Increasing)
Inventory levels continued to build in April, up 1.47 percent from March, up 11.28 percent since January 2010. There were a total of 17,705 active homes and condos listed in Nashville last month, compared to April 2009 when there were 17,430 on the market, a modest year over year increase of 1.55 percent. Interestingly, despite this year over year increase, the 2010 adjusted average monthly inventory is still lower than both 2009 and 2008 levels.

Pending Sales (Excellent, Inflated)
Pending sales in Nashville are up sharply in the first 4 months of 2010. Since January, pending sales have nearly doubled, soaring 193.43 percent higher. Additionally, total pending sales are 34.31% higher than their levels a year ago. In fact, the current 2,505 pending sales is the highest total in any month since June 2008 when there were 2,684 pending sales. This is not surprising news. The end of April coincided with the end of the federal $8,000 tax credit for first-time home buyers pushing a number of sales into April that would have normally occurred later in the summer. One must take some fraction of these sales and attribute them forward in an effort to annualize the data for a more accurate prediction of the coming months.

Closed Sales (Very Good, Inflated)
Just as with pending sales, the number of residential closings in Nashville has risen rather significantly. Since January, closings have more than doubled, increasing 208.52 percent. April’s total also represents a 16.9 percent increase over March. Compared to the same period in 2008, year over year closings have increased 35.49 percent when 1,516 properties closed. In addition, we have narrowed the gap over 2006 by another 6.11 percent during the past month. Again, let me caution you, these numbers have been inflated by the tax credit. Fascinatingly, April’s total closings are almost exactly the same as October 2009, the month prior to conclusion of the previous federal tax credit for first-time buyers. It is too early to compare the effect of each tax credit on Nashville sales, as the current tax credit concluded during a more advantageous time in our natural market cycle. Once an annualized analysis can be completed, I anticipate the ability to calculate the net effect of each tax credit.

Median Prices (Upward Trending, Stabilized)
April experienced the first month over month price increase since December 2009. Increasing 3.78 percent to $162,701, the median price in Nashville is now roughly equivalent to prices from a year ago. Compared to April 2009, the median price remained virtually identical, only falling 0.04 percent from $162,766. Furthermore, the current median price is only 0.0137 percent lower than the 12 month average median price for 2009. This evidence points towards a complete price stabilization in the Nashville market; however, it is still too early to tell whether the current tax credit has skewed the relative median price in a meaningful way or we have reached true stabilization.

months of real estate inventory nashvilleMonths of Inventory (Compressing)
Based on April’s closed sales, Nashville has 8.62 months of inventory currently on the market. Based on pending sales (contracts accepted but not closed yet) Nashville has only 7.07 months. The absorption rate has been significantly better over the past 3 months when there was 15.9 months of inventory based upon the same calculations – a 184.45 percent absorption rate increase. Do not let this rate increase fool you. Since 2003, the Nashville market has experienced a very similar 143.71 percent absorption increase over this same period annually.

Pragmatic Conclusions
As I begin to take seasonality into account, I am seeing that the first half of 2010 is shaping up to be quite similar to the second half of 2009. Yes, total closings and pending sales have risen sharply. Yes, the median price has increased, but the graph clearly indicates that the overall market levels are remarkably close to the same levels experienced towards the end of last year’s tax credit. The only appreciable difference is how quickly the 2010 numbers have risen. This dramatic rise is a simple combination of the Nashville housing market’s traditional seasonal gains plus some factor attributed to the conclusion of the current federal tax credit. Once adjusted, I anticipate being able to prove that the market has actually behaved in a slightly upward sloping linear manner. In other words, I should be able to mathematically prove that the Nashville real estate market has either begun to bottom out or has, in fact, bottomed out. Whether the market begins an appreciating cycle or is in for a double dip depends upon too many factors to list in this brief analysis.

Prediction
Many publications and periodicals will sensationalize the increasing volume of bank foreclosures and conclude that this increasing volume will have a negative effect on prices. This does not appear to be an accurate conclusion. Studies have shown that foreclosures have more than tripled in the Nashville market over the past 24 months and yet, the median price has still stabilized. So, what is the true difference between a bank selling at a stabilized lower price and a distressed homeowner doing the same? Not a whole lot from the market’s perspective.

pending home sales in nashvilletotal real estate closingsmedian price nashville housing market

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