From 2021 to 2022, real estate markets across the nation experienced significant growth and change. With historically low interest rates, increased demand for housing, and limited inventory, real estate prices skyrocketed across the country, and markets heavily favored sellers for the first time in over 15 years. Nashville, TN, was among the most competitive real estate markets. Considered one of the South’s fastest-growing cities, Nashville is predicted to become one of the nation’s fastest-growing cities by 2060.
Nashville’s overwhelming popularity is one of the many reasons why 2022 was considered one of the city’s best years for real estate activity. Will this trend continue into 2023? Will Nashville’s red-hot real estate market stay hot, or will it cool down over the next few years? Here is everything you need to know about Nashville’s real estate market in 2023.
Nashville market highlights from 2022
Similar to many real estate markets throughout the country, Nashville’s real estate market was red-hot in 2022. This trend began one year earlier when interest rates hit a record low of 2.65% in January 2021. Another factor that contributed to Nashville’s competitive real estate buyers was the massive influx of buyers. Nashville’s population has increased by over 15% over the last 10 years and continues to grow. Beyond area transplants, Nashville’s local buyer pool increased, thanks to more Millennials entering the real estate market than ever before. During 2022, Millennial buyers comprised over 43% of homebuyers, making them the most significant demographic to purchase a home that year.
These factors, combined with limited inventory, meant more buyers were competing for houses. This caused a ripple effect of bidding wars, which resulted in increased home prices. Over the last three years, Nashville’s real estate prices have appreciated over 47.6% in home value. In October 2022, the median sales price in Nashville was $506,462, which is a 19.8% increase from 2021.
Later in the year, however, as market interest rates for mortgages skyrocketed in the face of high inflation, demand began to wane and some, but not all, properties began to sit on the market for longer.
How the 2022 real estate trends will affect the Nashville market in 2023
In many ways, Nashville’s real estate market in 2022 was unprecedented - 40-year-high inflation rates, limited housing inventory and tremendous demand resulted in a massive increase in Nashville home prices. While 2022 was a red-hot year, particularly in the first half, many prospective homebuyers and sellers wonder if 2023 will be the same as 2021 and early 2022, or will market softness continue and perhaps even shift towards a buyer’s market in 2023?
While it is uncertain whether or not the market will continue to slow down or regain strength in 2023, what is certain is that market conditions will change. As of September 2022, interest rates increased to level out the market. In October 2022, interest rates rose to over 7%, the highest since 2008. Another factor that could slow market activity down is what is roundly considered to be the most widely anticipated recession in 2023.. With increased interest rates and an economic contraction on the horizon, will there be another housing crash in 2023? If so, what will Nashville’s real estate market look like?
First and foremost, while the slowdown will continue in 2023, it will not resemble the 2008 recession since the factors behind each phenomenon are different. The three biggest contributors to the widely expected recession in 2023 are record-high inflation rates, disrupted supply chains, and labor shortages. The 2008 recession, on the other hand, was due to low credit requirements and lax lending standards, which led to lending institutions approving loans to underqualified borrowers. As a result, millions of homes went into foreclosure, which meant massive job losses and homelessness. Because these two recessions have very different characteristics, it is unlikely 2023 will be a repeat of 2008.
While interest rates and recessions play an integral role in forecasting real estate market predictions, they do not tell the whole story. There are other factors at play, including a city’s local economy. Fortunately, Nashville has one of the strongest local economies in the nation. One of the main reasons thousands of people relocate to Nashville annually is due to the city’s economic opportunities. Nashville has an unemployment rate of just 2.7%, which is much lower than the national average of 3.5%.
Along with Nashville’s current job market, the city’s prospects will only improve as time goes on. Nashville’s projected job growth over the next 10 years is expected to increase by over 48.3%, which is well above the national average. This is excellent news whether you are a working professional or a retiree since cities with positive job growth positively impact home values.
What to expect for Nashville real estate in 2023
Many factors can influence a local real estate market, from interest rates to migration patterns. With these key components in mind, many Nashville buyers and sellers wonder what this means for the local market in 2023. Will Nashville remain a seller’s market, or will the market cool down? How will this affect home values? For those who are considering buying Nashville area real estate, especially Green Hills, TN, real estate, here is some good news. While interest rates are the highest they have been since 2008, there will be fewer buyers to compete with when searching for homes. That’s because interest rates heavily influence buyer behavior. When interest rates are low, buyers are more likely to buy. Once interest increases, competition decreases. Nashville’s housing inventory will also increase in 2023 since homebuilders are starting to catch up with demand. With more houses on the market, buyers and investors will have more options.
So what does this mean for sellers? While sellers are less likely to have multiple bids for their properties, Nashville’s property values keep increasing, which is excellent news for sellers. And since Nashville continues to grow, there will always be a steady stream of buyers searching for Green Hills luxury homes. Overall, Nashville’s market stabilization will benefit buyers, sellers, and investors, which makes 2023 an ideal time to invest in real estate.
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