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VOL. 37 | NO. 43 | Friday, October 25, 2013

Midstate’s residential real estate market seems to be cooling

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From 2008 to 2011, the big question for the real estate market was “When will this (the Great Recession) end?” Among the most astute the answer was “Who knows?”

Others went with “Time will tell” and, eventually, time did tell us: It was late 2011 as the home sales that quarter signaled the end of the recession for the area.

If the leaders, experts, Pollyannas, Chicken Littles, financial gurus and elected officials had been given truth serum, no one would have forecast the boom the city has experienced as of late.

Houses in most areas are selling for more than ever in the city’s history. That means forever. As for price per square foot, the preferred calculation in the “It City,” Belle Meade leads the way in single-family sales with a sale of more than $730 per square foot, another for more than $400, and a few topping $300 per foot, with $200 being the standard.

In the 12South area, a neighborhood that could barely command $100 per foot not so long ago, sellers are now getting more than $300 per foot on occasion and $270-plus with regulatory. In Hillsboro Village, houses have sold for as much as $285 per foot, with $270 as the norm.

In Sylvan Park, new-construction sales are closing at $240 per foot as quickly as they can build them. Previously owned homes top $200 when in good condition.

West Meade had five properties close and two more go pending in a four-week period for over $1 million. The neighbors to the East across the river have eclipsed $200 per square foot with sales as high as $240 a foot.

Green Hills is all over the board, from $235 a foot to as high as $300 per square foot in many cases. By the way, houses purchased for the purposes of demolition have been excluded from these properties since they would skew the numbers, since homes with less than 1,300 square feet have sold for more than $400,000 during this boom.

And what about those wacky downtown high-rises that all the real estate experts were going to scoop up for 25 cents on the dollar, or the whole thing for a million dollars? The Adelicia has three sales of more than $500 per square foot, with one at $560.42, scoring high in the bragging rights for price per square foot.

There are several more at $400 per foot. However, the winner and still champion is the Icon, with a sale of $571.37 per square foot. Like the Adelicia, $400 per square foot rules the day there.

And the development that started the madness, Tony Giarratana’s Viridian, continues to appreciate with numerous sales of more than $325 per square foot. Back in 2006, those sold for $180 per foot for the affordable units and $220 per foot for the run of the mill.

As the market has skyrocketed – fueled by lack of inventory, creation of jobs, relocation of the workforce, and an overall improved economy – the new question is similar to the old question: When will the good times end?.

The answer: “It has.”

Back in early September, I wrote that I felt the October sales data would define the strength of the current market and serve as a portent for things to come. Having reviewed the numbers, I agree with me.

Following almost two years of growth in the 22 percent range – to as high as 31 percent in March 2013) – the market has been torrid with multiple offers.

Earlier this month, the Greater Nashville Association of Realtors announced that sales had increased by 15.9 percent, a healthy, brisk number to be sure, but short of the 20-somethings growth the market has experienced during the previous two years.

Further evidence of the return to normalcy is the pending sales number. Pending sales, those with no contingencies, have increased 8.7 percent in September, as compared to September of one year ago. So, the area can expect an increase of approximately the same number in October.

During the period from 1992 through 2008, the Greater Nashville area experienced annual growth in unit sales of 3 percent to 5 percent each year. Those increases became the norm. That consistently steady growth was the envy of other markets that crashed and burned years before Nashville stubbornly succumbed to the recession.

As Nashville appears to be settling back into its comfort zone, inventory should build and some of the chaos will be exorcised from the market.

Barbara Keith Payne, a highly successful real estate veteran with Pilkerton Realtors, summed it up well.

“We have all felt it slowing down for some time,” she says. “While it’s not as crazy as it was, there is still some super-crazy stuff going on out there.”

In 2012, November and December sales were in the 2,100 unit range with January and February dipping to 1,634 and 1,784 respectively. As compared to the 3,000-plus sales in May, June, July and August, there could be as much as a 48 percent reduction in units sold, 3,151 in July and 1,634 in January. So the area will be in for a relatively mild winter as real estate goes.

Conversely, sales should increase by that same 48 percent from January through July even with interest rates having increased by 25 percent or more.

Richard Courtney is a partner with Christianson, Patterson, Courtney and Associates and can be reached at richard@richardcourtney.com

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