MTSU statewide housing report shows signs that market is cooling. Here's why

Nancy DeGennaro, Murfreesboro Daily News Journal
·3 min read

Tennessee’s housing market shows signs of cooling, according to data gathered by the Business and Economic Research Center at Middle Tennessee State University.

Data for the second quarter of the year was published in BERC’s “Housing Tennessee,” a statewide report.

“A sign of uneasiness emerged in the corners of the housing market as reflected in significant drops in housing permit activities in Tennessee,” said report author Murat Arik, director of the BERC at MTSU.

Over the past two years, when the Federal Reserve lowered interest rates, Tennessee home buying skyrocketed. Builders couldn’t keep up with demand and the inventory of existing homes was extremely low. Houses sold quickly and offers were often significantly over the listing price.

“I call it the 2020 covid interest discount,” said Jason Galaz with Find a Home in Tennessee. “But that’s over.”

The Federal Reserve raised rates this year and current mortgage interest rates are hovering around 6% to 7% and Galaz doesn’t expect to see that lower until spring 2023.

Higher rates have caused a downturn in the market and one of the most notable signs is the number of times houses is sitting on the market, explained Galaz, who is launching Tennessee’s first all-Spanish home search in the coming months. The Zillow-style site will target the growing population of Spanish-speaking homebuyers.

“If it’s up above $400,000, it could sit on the market a month, maybe two,” said Galaz, whose brand covers the entire state of Tennessee market. “A lot of home sellers are still expecting high demand and they can make up a number. When their home doesn’t sell that quickly, they have a reality check.”

Houses in the high $200,000s and $300,000 are still selling for over listing price and quickly, however, Galaz said. He recently showed a house that was listed at $335,000. His seller offered $5,000 over the listing price and they lost the bid.

The BERC report showed those sort of “mixed economic outcomes.”

But coupled with strong jobless numbers - unemployment claims fell 72% from last year - the housing market showed positive signs regarding homeowner vacancy rates, mortgage tax collections, home prices, and mortgages past due.

Key report highlights:

• Tennessee home prices continue to trend upward for all of Tennessee’s metropolitan statistical areas, which are defined as urbanized areas of 50,000 or more residents.

For the second quarter, the Clarksville MSA saw the most significant increase in home prices from last year (30.5%), with the Nashville MSA closely behind (30.4%). The smallest increases were recorded in the Memphis MSA (20.6%) and Morristown MSA (21.3%).

• Tennessee’s single-, multi-family, and total home permits all fell both quarterly and yearly. The state recorded quarterly and annual decreases of 18% and 27.2%, respectively.

• Closings for the Nashville, Knoxville, and Memphis regions “were a combination of increases and decreases” from the previous quarter, the report noted.

Houses over $400,000 are sitting on the market longer, although houses in the $200,000 and $300,000 ranges go quickly.
Houses over $400,000 are sitting on the market longer, although houses in the $200,000 and $300,000 ranges go quickly.

The Nashville area saw the most significant drop (4.3%), while the Knoxville and Memphis areas recorded closing increases (1.7% and 2.9%, respectively). Year-over-year changes were most significant for Nashville (-5.64%). Knoxville and Memphis experienced more modest changes, with a 0.4% increase in Knoxville and a 0.6% drop in Memphis.

See the full report and more detailed breakdowns at mtsu.edu/berc/housing/.

BERC’s report is funded by Tennessee Housing Development Agency, the state’s housing finance agency. The quarterly report offers an overview of the state's economy as it relates to the housing market and includes data on employment, housing construction, rental vacancy rates, real estate transactions, mortgages, home sales and prices, delinquencies, and foreclosures.

The Business and Economic Research Center operates under Jennings A. Jones College of Business at MTSU. For more information, visit mtsu.edu/berc/.

Reach reporter Nancy DeGennaro at degennaro@dnj.com.

This article originally appeared on Murfreesboro Daily News Journal: Is Tennessee's housing market cooling? MTSU data outlines trends