Many in the residential real estate field in Nashville felt that 2013 would be the crucible year for the market.
A recap of the past two years show that 2011 was the first year in which unit sales in the greater Nashville area had increased during a calendar year since 2006 – a modest 6 percent but a gain nonetheless – and the hope among the optimistic was that the market had bottomed and was rebounding.
As 2012 began, there was fear of a double-dip recession, and industry insiders were curious as the sales data began to become available. The numbers from start to finish were astounding as month after month sales increased by 25 to 30 percent compared to the previous year.
It must be remembered that 2011 numbers were only slightly better than the recessionary sales figures, so the increase was based on abysmal numbers. But 28 percent is 28 percent, and the local economy continued to grow.
Last week, the Greater Nashville Association of Realtors (GNAR) released its January sales report. There has not been a report as wildly anticipated since 1983 when Dan Aykroyd, Eddie Murphy, and Jamie Lee Curtis starred in the movie “Trading Places.” In January, there were 1,634 homes sold, up 18.7 percent from 2012. So, the growth continued for at least one month.
Since the GNAR report also includes pending sales – houses under contract with no contingencies in place – the number was 1,968, compared to 1,615 in 2012.
February sales will reflect even larger increases. Anecdotally, veteran Realtors in the area are reporting that they are dealing with more buyers and sellers than they have in their careers.
So the questions have gone from “will the market return?” to “when will the market rebound?” to “has the market really rebounded?” to “how long can this last?”
But there indeed is the rub. Wealth management guru Bill Decker of the highly regarded Decker Wealth Management firm advised a group of Realtors to “work really hard for two years and don’t spend any of the money you make.”
In Biblical terms, he referred to the “work seven years and accumulate seven years of food” philosophy since a famine could be coming. Overall, he was quite optimistic, especially about the Nashville market, in which he noted the shares of certain local stocks had performed amazingly well over the past three years, up an aggregate of almost 100 percent. The exceptional trend followed the real estate market performance.
To Decker’s point, interest rates have proven to be the best incentive to expand the real estate market for the past 30 years. As rates were relaxed, home sales climbed. In order to assess what has happened here in the housing market, it should be noted that prices along with interest rates fell from 2008 through 2011.
If that combination does not lead to increased sales, nothing would. Yet, in other markets across the country, the same conditions are not yielding the same results.
With sales on the rise, prices have followed and frustration has fallen upon Nashville potential home buyers as many properties in virtually every price range in all areas of the city are being devoured in their first hours on the market.
Oddly, there are sellers who have been unable to capitalize on the craze, as this frenzied lot of buyers is also “picky as hell,” as one Realtor put it. She noted they are quite demanding inasmuch as they want their new house to include every feature that was in the house that they lost, i.e., the one that got away.
Overall, the success in the market feeds ancillary industries. Price Lechleiter, who doubles as the managing broker at Fridrich and Clark’s Brentwood office and the president of the Greater Nashville Association of Realtors, says: “Locally, the economic impact of the increase in home sales goes well beyond the actual transaction. Those sales prompt additional construction jobs for building new homes and help initiate major purchases made by homeowners, such as appliances, furniture, floor coverings, and lawn care equipment.”
With median prices for homes up from $157,500 to $167,000, and condo prices rising from $140,325 to $150,000, property owners are now, for the first time in seven years, able to sell their homes for more than they paid and finance their new homes at an interest rate lower than their current rate. That should bode for some happy days for the market, yet Decker and Lechleiter are cautious.
“Though these numbers are a great start to the year, challenges still remain for the overall real estate market,” Lechleiter says. “It’s difficult to anticipate the impact national economic trends and government choices will have.”
There was a time in 1992 when Realtors prayed for rates to drop below 10 percent. In the current market, if rates hit even the six percent range, it could be devastating. These are fragile and unprecedented times. Rates will rise. Then what?
Joan Pinkley, a local Realtor, has built an area in her basement known as a larder. This is a room below ground level she maintains at 55 degrees or so and is a place for storage for vegetables and fruits that do not require refrigeration. She is quick to point out that refrigeration in many cases cause these foods to lose their tastes and their nutritional values.
While fattening themselves in this market, Realtors should begin larder construction for the lean years.
Richard Courtney is a partner with Christianson, Patterson, Courtney, and Associates and can be reached at [email protected]