Our Nashville Tennessee Housing Market Story

BY BRANDON VAGNER, CPA, Ph.D., & WALLET WIT FOUNDER

Our Nashville Tennessee Housing Market StoryMy wife and I moved to the Nashville Tennessee area in 2017 and decided to rent at first, because we wanted to learn the area before we bought. Boy was that a huge mistake! Sometimes in life, playing it safe just does not pay off.

Back in 2017 the housing market in Nashville Tennessee had already experienced something like two straight years of 10 – 15% year over year home value increases. At the time, and depending on who you talked to, people were saying this is just the tip of the iceberg with home value increases in Nashville Tennessee, but others were speculating that it was a bubble about to burst. So, who was right?

Trying to Buy a House in the Nashville Tennessee Area

Keep in mind we’re looking to buy about 35 minutes south of downtown Nashville TN. We’re very lucky our jobs have us that far south of the city, and we can explore properties that are a little more affordable. If you want to get an idea for what prices are in other areas of Nashville TN, just hop on Zillow and take a look.

The first thing we noticed in the area we’re looking is that there are a TON of 3,000+ square foot houses on the market, but not many under 2,300 square feet. That’s a huge problem for us, because it makes it that much more difficult to find an affordable used house, and we really want a house under 2,300 square feet.

You might ask, well what about a new build? Well, it seems like all the new developments that put any thought into quality are 3,000 square feet or more. We actually reached out to a couple contractors and were told they don’t do anything under 3,000 square feet.

All that said, it’s a game of patience and luck to score a good house in this area.

What Our Last Offer Experience Was Like

My wife and I now know the school district we want to buy in and five or so specific neighborhoods we’re really interested in. We have been looking in these areas for quite some time, and are confident that it’s for sure where we would like to buy. A few weeks ago, in Spring 2019, a home hit the market we liked, and this is where it gets interesting.

The 2,700 square foot house had sold in 2017 for $245,000. The family who owned it from 2017 to 2019 took very good care of the place, but didn’t do anything to it except a little paint here and there. At the time of our offer, all bathrooms and the kitchen still needed to be updated.

Drumroll…… Their asking price in Spring 2019 was $320,000. Yes, that’s a 30% increase in just two years. Keep in mind, that increase was not a result of a remodel. It was purely market driven.

Even at that high price, we knew we needed to go in strong if we were going to get this house. Against my better judgment, we offered $11,000 over asking price plus we said we would pay for all closing costs. Within 24 hours, there were 9 offers and they ended up taking someone else’s offer. That means somebody paid close to $100,000 more (40% increase) than what this family had paid two years ago. Wow!!!

I must say that I was a little relieved when I heard our offer was not accepted. I’ve always known that you make your money with real estate at the time of purchase, and I had a lot of uncertainty that it was a good buy. Sure, if the market here in the Nashville TN area continues to increase, it would have been a great buy. However, my mind continues to see flashbacks of 2007/2008. I remember that time all too well, and I’m extremely nervous to buy in this market.

When my wife and I bought our first house in 2010, the economy was still down and homes were being foreclosed on right and left. I remember going to look at homes at the age of 24 and the owners of these houses that were being foreclosed on were literally in the houses packing up their belongings. I’ll never forget the looks on their faces or the stories of people I knew who had purchased a house just before the crash. Their houses owned them, and I told myself I never wanted to be in a situation where my house owned me.

Is the Nashville Tennessee Housing Market Growth Similar to San Francisco’s Early Growth?

This question of whether or not the Nashville Tennessee area has similarities to the San Francisco market is largely why I put that offer in. Corporations are moving into the Middle Tennessee area at an incredible rate. For example, Amazon recently announced a 5,000 job facility coming to downtown Nashville and there are many more. Just drive through downtown Nashville and you’ll see about 20+ construction cranes on any given day.

I fully realize Nashville Tennessee and San Francisco are very different, but the boom is strikingly similar on a smaller scale. There are reports of 100 people a day moving to the Middle Tennessee area, and we constantly meet people who have just moved to the area. It’s one thing to read it in the reports, but I can tell you we meet so many people who have just moved here for jobs and opportunity for their families. It is an amazing thing to watch first hand.

From my San Francisco housing market research, I have known that a key indicator to look out for is foreign investment in the local housing market. I have been asking my real estate friends for quite some time if they have noticed an increase in foreign investors, but they personally had not seen any. However, I just met a Nashville TN area property manager that works for a group of foreign investors that have recently begun purchasing homes in the area.

The issue I see is that these investors are purchasing the high-quality homes in the mid to high 200,000’s. Now I know why it’s so difficult for my wife and I to find a good affordable home here. We not only have competition with others similar to us, but we’re also competing with foreign investors. It’s extremely difficult to compete with their cash offers and these investors are not afraid to go over asking price. These foreign investors are speculating that Nashville TN might provide large profits like San Francisco and they don’t want to miss out on the opportunity.

Final Thoughts

We absolutely love the Nashville Tennessee area. It really is incredible, and has so many positives. We’re probably going to have to come to terms with the fact that we’re just not going to find a great home under $250,000 and will have to buy in the low to mid $300,000’s unless we want to take on a rehab. Until we completely come to terms with that, we’re fine renting. We are fortunate enough to have found a wonderful rental house, and will continue to look for opportunities to buy.