Move over Chicken Little, because real estate is back. One of the key indicators that a recession was in full swing was the state of the housing market. But today, we are happy to share some good news that will have property owners smiling…
Home surge: Sales, prices, demand spike across region’s housing market
Greater Nashville’s seemingly sluggish housing recovery has shifted into a summertime surge.
Home prices are breaking records, supply is shrinking, sales are climbing and builders are busier than they have been in years. In the past few months, the ailing housing industry has made a sharp turn — in both sales and lending — toward a sellers’ market. It’s a key driver in Middle Tennessee’s economic recovery at a time when other sectors still need a boost.
“It’s been a dramatic shift,” said Jack Miller, an agent with Nashville-based Parks Realty. “We are trying our best to keep up with the demand. … In 2009 we waited for the phone to ring. Today we try to get out … the door before the phone rings. It’s a new world.”
The turnaround is not only benefiting real-estate brokers and home builders. Retailers, bankers and other industries stand to feel the bounce. Homebuyers stimulate the economy in lots of ways. They buy furniture, refrigerators, garden hoses and lawn mowers. And when home values go up, homeowners feel better about their finances and are more apt to spend.
A healthy housing supply also is critical for business growth. Housing is at the top of the list for companies deciding where to relocate. The recent frenzy — limited supply means bidding wars are back — is reminiscent of the early 2000s. But real estate professionals are not worried about another bubble. Construction was so constrained during the recession that a lack of supply is now driving up prices.
Suddenly, builders can’t build new homes fast enough. Buyers are snagging them before construction is complete with little to no concessions from builders.
“Builders are getting paid right now,” said David McGowan, president of Regent Homes. “Two years ago we were really struggling to keep the doors open and pay the subcontractors and the banks. It’s back to profitability.”
Home construction was up 34 percent during the first quarter in Greater Nashville, according to Metrostudy, a real estate tracking company. Meanwhile, sales of new homes were up 21 percent. The surge in home construction is a sign of job growth. “Traffic is very strong,” McGowan said. “The latest uptick in interest rates has caused a lot of people to get off the fence, and banks have opened the door and started to lend to people who have equity. Things have greatly improved over the past nine to 12 months.”
Middle Tennessee banker Richard Herrington said the second quarter saw a “remarkable increase” in real estate activity compared to last year. “We have never had volume like this in the 20 years we’ve been in Williamson County,” said Herrington, president of Franklin Synergy Bank. “It’s by far the best first half we’ve ever had.” In the second quarter, the number of mortgages closed by Franklin Synergy was up 35 percent compared to the previous year. Meanwhile, the number of construction loans the bank closed was up 62 percent.
Buyers are looking for a home where they can close a sale in 30 days, said McGowan, but their options are slim. A big worry among real estate professionals is the shortage of lots ready for home construction, said McGowan, adding that we are already seeing shortages in certain areas of Williamson and Davidson counties. With demand for new homes outpacing supply, Nashville’s stock of new single-family homes has dipped to a two-month supply, down from a high of 3.8 months three years ago, according to Metrostudy.
With demand strong and supply low, prices are on the rise.
For the first time ever, the median sales price for a single-family home in Nashville surpassed $200,000 in June, according to the Greater Nashville Association of Realtors.
The median price for a single-family home sold in Nashville last month was $205,950, up from $179,000 a year ago. The previous high was $196,000, which was set in June 2007. In today’s market, homes are selling on average within 1.3 percent of list price in Nashville, according to ZipRealty.
Prices have increased rapidly across the country. From May 17 to June 15, the median sales price of nearly $276,000 in the metro areas that ZipRealty analyzed was $5,000 higher than just two weeks earlier, and 15.8 percent higher than in the same period of 2012. “Home sellers are moving back into the market with slightly greater confidence and in growing numbers today,” ZipRealty CEO and President Lanny Baker said.
Many expect the rising prices to slow.
“With the recent jump in mortgage rates, on top of steady home price increases over the past several quarters, there are good reasons to anticipate some cooling off in the housing market; however it was difficult to detect any clear signs of that change in trend as of mid-June,” Baker said.
Bidding wars return
So far this year, Realtor Stephanie Crawford of Keller Williams has done more business than all of last year. These days she’s getting nearly 250 inquiries a month from her website. During the recession, that number was closer to 100. If a home is renovated, located in a hot neighborhood with little inventory and priced right, it’s not uncommon for a seller to get multiple offers shortly after listing. “Bidding wars are becoming the norm in certain neighborhoods,” Crawford said, pointing to East Nashville as one example. “It’s crazy what’s going on over there,” she said. “I recently had a buyer that bid on a property, and we were one of 11 buyers. We bid $10,000 over list, and we did not win.”
A big factor driving Nashville’s housing recovery is corporate relocations.
“Over the last year we’ve seen both markets — local buyers and the out-of-town buyers — rebound,” Miller said. “Especially in upscale areas we have had a large influx of corporate relocations, which came to a near shutdown for years.” During the recession, companies nationwide tightened their belts in what they were offering to move people across the country. And people who were offered an opportunity to relocate were reluctant to sell their home in a down housing market. Real estate professionals believe the recent shift is just the beginning of the next housing boom. “Prices [in some areas] are still not what they were at the height of the recession in 2007,” Crawford said. And while Nashville, Brentwood and Franklin are on fire, others areas of Middle Tennessee are lagging.
“In some of the outlying areas the story is a little different,” Miller said. “Cheatham County and Fairview are still in somewhat of a lull. They haven’t turned the corner yet.”
Nevin Batiwalla covers real estate/development and regional economic development.www.bizjournals.com