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Will Home Prices in Nashville Slow Down?

graph-163549_960_720As real estate prices across the United States continue to increase up to and even past 2007 levels, we’ve begun to hear rumblings of a housing bubble and subsequent burst. In the greater Nashville area, we’re currently seeing record-breaking housing prices with no sign of them stabilizing or slowing down, but can we expect that to continue? Here’s a closer look at where we may be going:

Typically during an election year, we see slower growth because of fears of the uncertainty of the future but this year’s levels in Nashville certainly aren’t following that pattern. Nashville is definitely a hot city for real estate right now for a few reasons. For one, the Emerging Trends in Real Estate report recently named Nashville a top 10 city for commercial real estate and typically residential real estate follows the trend of commercial real estate. Commercial business brings in existing high-level executives who need housing but also creates new jobs where there were none. In addition, we’re seeing many out-of-state buyers from larger cities on the east and west coasts finding that their money goes further in areas like Nashville.

So while things are looking good, we certainly can’t get too comfortable.

According to Barry Nielson with Investopedia, “Home prices might fall (or rise) quickly to a point that puts them back in line with the long-term average, or they might stay constant until the long-term average catches up with them.” In other words, at some point there has to be a correction, even slight, and prices can’t just continue to rise indefinitely. However the big question mark is how long they will continue to rise and how much they will then drop in order to level off again.

Another reason we will eventually see a slow down in the market is because of interest rates. The Federal Reserve has kept interest rates low for an unprecedented amount of time and at some point, these interest rates will correct closer to average and the market may stall at that point. Buyers will have less buying power with the same amount of money once interest rates rise again, slowing down even the most aggressive housing markets. Nashville housing prices also may begin to outpace its residents’ income, and people will start selling and moving to other comparable but more affordable cities like Louisville, Indianapolis, Memphis and Knoxville.

So what can we take from all of this? Nashville seems to be nowhere near slowing down anytime soon, but we also must expect that there will be a time when it does.

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