It’s no secret that the real estate market in the US has been experiencing some unbelievable upheaval. The past couple of years has seen home values increasing dramatically, with some property values doubling in a short time. We’ve also had the benefit of historically low mortgage rates and extremely low inventory.
These factors have been driving the Nashville housing market to unprecedented levels. Between the effects of the pandemic fueling the desire for a home that meets both work-at-home and family needs, as well as the influx of newcomers from other regions discovering the appeal of the Nashville area, we’ve seen asking prices skyrocket and offers to go even higher. It has definitely been a seller’s marketing.
However, with the recent rise in inflation and the Fed’s decision to raise interest rates, we are beginning to see some interesting fluctuation – but is it a crack in the market?
The answer is “maybe??”
The days of listing your home for 50% or more above what you originally paid, getting multiple offers leading to a bidding war, and having a cash offer well above the list price in hand within days may be winding down.
The biggest factors in the transition are inflation and the recent increase in interest rates. According to multiple sources, as of May, the average mortgage rate increased to about 6%. This is the highest rate we’ve seen since 2008, but it’s still well below the highs of the 1970s/1980s, which peaked at 18.4% in 1981. As of the end of June, rates were back down slightly to 5.4%, which may still seem quite high if buyers were not witnessing the 1970s and 1980s markets.
What this means for sellers is that you will want to work with professionals, like our team at Warren Bradley Partners, to determine the “sweet spot” for the listing price. Then you should expect your home to be on the market longer than the average over the last two to three years. Current trends indicate that the asking prices on newly listed homes are down 1.5% in June, and between 6% and 7% of home prices were reduced each week during that same period. Sellers will likely find that they are lowering prices to something that more accurately reflects the home’s true value. They may also need to consider making some concessions on things like inspections and appraisals which many buyers were previously waiving.
The good news is that, because inventory remains low, demand is still high. This suggests that prices are not likely to bottom out. And, even with things cooling down on pricing and time on the market, it’s still a seller’s market in our area. We continue to see an influx of new potential homeowners relocating to Nashville and its suburbs due to expanding job/career opportunities, major businesses moving headquarters and manufacturing facilities to Middle Tennessee, and people continuing to discover all we have to offer in the areas of education, entertainment, the arts, and more.
So, the question remains – Is it a Crack in the Market?
Actually, what we are seeing is likely a mild correction. Interest rates have been extremely low, listing prices – and offers – have been extremely high, and demand has far surpassed supply.
As mortgage rates increase in the 5-6% range, buyers are going to be more thoughtful and look for homes that are more affordable. Sellers will need to adjust expectations and be willing to negotiate on some aspects.
Ultimately, the process of buying and selling homes may simply be returning to a more normal state.
If you are ready to buy or sell in Middle Tennessee, Warren Bradley Partners will provide the information and guidance you need to navigate the changing market, while putting your needs first, with complete discretion. For more information, Click Here!