Runaway market slows, still ahead of record 2020 pace

Friday, June 18, 2021, Vol. 45, No. 25

6321 East Valley Drive

Middle Tennessee real estate unit sales increased 24% in May compared to May 2020, Greater Nashville Realtors figures show. With inventory as low as it is, there are those who might wonder how these sales could occur.

While the 4,063 closed sales are more than the 3,267 sales in May 2020, they lag slightly behind April’s 4,119 sales. With seasonality built into the real estate data, sales actually dropped from April to May.

Sales classified as pending were lower in May (3,788) compared to April (3,837). In order for June to eclipse the previous June, some 4,191 sales must occur. With 3,778 pending sales, the number is likely to surpass June 2020 based on anecdotal numbers from leading Realtors.

One thing perplexing members of that focus group is there are considerably fewer showings than in previous months. Showings normally slow toward the end of May since there are graduations to attend. And this year had twice that amount at some institutions that staged a ceremony for those who would have flipped the tassel in 2020 but were denied by the pandemic.

Summer weddings also eat into sales numbers, especially with those weddings delayed from last year taking place this year.

And amid all those delays, there were more home sales in the area than in any previous year. Clearly, some things can wait and some can’t.

Now with masks removed, crowds gathering and real estate brokers and their clients riding in the same cars, there could be a slight decrease. Of course, that is based on the cannibalism of the market, as all of the properties are being devoured once they show themselves.

New construction has instituted new policies as builders rarely price homes before completion for two reasons: There is wide fluctuation in the cost of materials and the value of their product is increasing astronomically.

This phenomenon is driving buyers crazy. They see houses they would like to buy and have the wherewithal to purchase the home, but the sellers will not give them a price.

Another new wrinkle rearing its ugly head has buyers being forced to submit offers with no appraisal or financing contingencies. Most of these buyers have witnessed firsthand the strength of the market, having lost a home or two along the road to the house they are finally able to get under contract.

Many felt these bidding wars were universal and would drive home prices upward across the board. As it turns out, appraisers often use sales in one particular development if there are enough comparable sales to complete the appraisal. These sales can be as old as six months. That would be January for those challenged by calendars.

In January, Nashville and the surrounding area were normal. Twas the March winds that brought the escalating offers and the outrageous prices with those homes closing in April and May and scattered about the counties.

Now buyers are forced to use their cash reserves in order to purchase the real estate. They can refinance and take the cash out of their properties next year when appraisals more accurately reflect the market. Then they can reload the college funds, IRAs and other investments.

By then, 3% loans have evaporated. Then it becomes decision time in Tennessee. Should owners go for the cash or take a higher interest rate? Second mortgages might become popular once again.

One positive thing to emerge from the wildness of the market is that sellers are no longer pillaged by buyers demanding that they – the sellers – repair every item on the inspection report. In this frenzy, most contracts have the inspection on a pass/fail basis.

With this scenario in place, buyers are opting to take houses in “as-is” condition and make any repairs that they desire on their own dime.

“There is a beauty in the simplicity of the negotiations now,” says home inspector extraordinaire John Watkins, founder of Nashville Home Inspection. The inspector’s job is to inspect every aspect of the house and report the findings. They are neither trying to hold deals together or kill them.

All too often, Watkins has received calls from buyers requesting an inspection on a different house from the one he had inspected for the same buyers. He is amazed that the inspection would cause either party to walk on the deal. Now, if they want the house, they take it – warts and all. Just like the house they just sold.

Sale of the Week

Yvonne Kelly with Zeitlin/Sotheby’s International Realty knows her way around a house, any style house, and relishes the rare opportunity to market a home designed by Nashville’s premier architect of contemporary design, the world-renown Manuel Zeitlin.

Located at 6321 East Valley Drive, Kelly described the home as a “stylish, sophisticated, contemporary located on an elevated lot on a quiet West Meade Street.”

With three bedroom, three full bathrooms and one half bathroom, the 4,085-square-foot house sold for $2.64 million, with Lara Kirby of Village’s Kirby Group bringing the discriminating buyer. Kirby is a top-producing agent with sales over half of Tennessee.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty and can be reached at richard@richardcourtney.com.