The Nashville housing market will experience an accelerated sales volume in 2010 aided by the government’s extension and expansion of the first time home buyers federal tax credit, more government-backed lending assistance, and historically low mortgage rates according to 90% of major forecasts for 2010.
Surrounding real estate markets will improve in the Southeastern U.S. with average housing deflation forecasted at 8.4% regionally. This figure represents the lowest amount of deflation on an annual basis in the past four years (actual price deflation over the past 4 years never reached the predicted decline). Nashville will only feel an estimated 5.2% of deflation overall with the hardest hit sectors being the luxury homes market over $600,000 and developer owned condominiums.
Reported unemployment peaked at 10.2% nationally, a number that has not been reached since the Great Depression. Most economists believe an economic recovery has begun, but with a suppressed job recovery anticipated, real estate will continue to experience price decline. Nashville will certainly see prices fall, but total sales and sales volume will increase in 2010. This phenomenon is commonly know by the phrase “inventory burn off”.
Ongoing banking troubles will contribute to added price deflation and spur additional foreclosures in Nashville which will have to be absorbed by new buyers before the real estate market fully stabilizes. This will cause the Nashville housing market to drag towards price stabilization which will not be achieved until late 2010 or early 2011. Momentum should gain strength in the second half of the year with expected improvements in mortgage lending and improved availability of credit.
Faster than average employment growth will boost the Nashville housing market which has been slowly working through a recovery phase. Unemployment or underemployment is the single largest factor for a full economic recovery in Nashville. However, potential super-projects like the new Nashville convention center and Medical Trade Center would alleviate these concerns and lead to a faster recovery despite any future tax implications.
The downtown Nashville condo market will continue to gain sales momentum as the second half of 2009 sales almost doubled those of the first half. Condo auctions contributed to a renewed interest in the downtown market and effectively lowered prices to a level last seen in early 2006. I expect a 12% price decrease in developer owned condos as remaining inventory is absorbed, but for existing resales to only fall by just over half that amount.
Someone will purchase the befuddled 5th & Main project as well as the Rolling Mill Hill development and reintroduce both to the marketplace. The 5th & Main condos will most likely be available for resale at some discounted price and the Rolling Mill Hill condos will most likely go the rental route, perhaps workforce housing. Neither will have much trouble once the price for each have been reset.
The word “inflation” will become the new buzz word instead of “foreclosure” by the end of 2010.