The Tennessee housing market is experiencing a surge in property values, with the average home value increasing by 10.5% over the past year, according to a recent report released by Zillow. In this blog post, we will delve into the report's key takeaways and analyze whether it is currently a seller's or buyer's market.
The recent home value report by Zillow states that the typical home value in Tennessee is $291,334, up by 10.5% over the past year. This significant increase in property values indicates a strong demand for housing in the state. However, it also suggests that affordability may become a concern for homebuyers, particularly first-time buyers, in the near future.
The median sale-to-list ratio in Tennessee, as of December 31, 2022, is 0.985. This means that homes are selling at 98.5% of their listed price, indicating that sellers have an upper hand in the market. Additionally, 20.2% of sales in Tennessee are over the list price, while 57.7% are under the list price.
According to the report, the median days to pending in Tennessee is 29, as of January 31, 2023. This metric measures the time it takes for a property to go from listing to contract. Lower median days to pending figures indicate a faster-moving market, suggesting that homes are selling quickly. This is another indication of the current seller's market in Tennessee.
2023 Market Forecast
Based on the report, the Tennessee housing market is expected to continue being a seller's market in 2023 due to strong demand and low supply. The surge in property values may become a concern for affordability, particularly for first-time buyers. The median sale-to-list ratio and the percent of sales over/under list price indicate that sellers currently have an upper hand in the market.
The median days to pending metric also suggests a faster-moving market, with homes selling quickly. However, it's essential to note that market conditions can change, and consulting a local real estate agent is always wise before making any significant decisions.
Nashville-Davidson-Murfreesboro-Franklin, Tennessee is among the top major metropolitan regions with the most overvaluation of housing prices. According to Zillow, Nashville-Davidson–Murfreesboro–Franklin Metro home values have gone up 10.1% over the last twelve months and will rise by 1.2% between Jan 2023 and Jan 2024.
Tennessee Real Estate Appreciation & Forecast
Investing in Tennessee real estate is a good idea, especially in Nashville and Memphis, where there is always a high demand for housing. According to Neighborhoodscout, the Tennessee real estate APPRECIATION RATE in the previous 12 months (2021 Q3 – 2022 Q3) was among the highest in the country as the median price went up by 23.21%. APPRECIATION RATE was 3.19% between 2022 Q2 – 2022 Q3. Prices have risen by 47.21% in the last two years and 191.08% since 2000.
- MEDIAN HOME VALUE: $285,077
- AVERAGE RENT: $1560 per month
- OWNERS = 65%
- RENTERS = 35%
All-Transactions FHFA House Price Index for Tennessee (Quarterly)
- Q4 2022: 624.66
- Q3 2022: 623.24
- Q2 2022: 603.79
- Q1 2022: 559.93
- Q4 2021: 532.41
Tennessee Housing Market Forecast
Here's Zillow's forecast for some of the metro areas in Tennessee. Zillow provides a 3-value forecast for each of the metro areas in Tennessee, which includes the current median home value, the forecasted 1-year change, and the forecasted 2-year change. The values provided are as of January 31, 2023, and are as follows:
- Nashville, TN: Zillow forecasts a -0.3% change in median home value over the next year, with a projected 1.2% increase over the next year.
- Memphis, TN: Zillow predicts a 0.1% increase in median home value over the next year, with a projected 2.3% increase over the next year.
- Knoxville, TN: Zillow predicts a 0.6% increase in median home value over the next year, with a projected 4.5% increase over the next year.
- Chattanooga, TN: Zillow predicts a 0.8% increase in median home value over the next year, with a projected 3.4% increase over the next year.
- Clarksville, TN: Zillow predicts a 0.3% increase in median home value over the next year, with a projected 2.2% increase over the next year.
- Kingsport, TN: Zillow predicts a 1.2% increase in median home value over the next year, with a projected 3.9% increase over the next year.
- Johnson City, TN: Zillow predicts a 1.2% increase in median home value over the next year, with a projected 4.5% increase over the next year.
- Jackson, TN: Zillow predicts a 1.3% increase in median home value over the next year, with a projected 3.9% increase over the next 2 years.
- Morristown, TN: Zillow predicts a 1.2% increase in median home value over the next year, with a projected 5.1% increase over the next year.
- Cleveland, TN: Zillow predicts a 0.7% increase in median home value over the next year, with a projected 3.7% increase over the next year.
- Cookeville, TN: Zillow predicts a 1.4% increase in median home value over the next year, with a projected 6.5% increase over the next year.
- Tullahoma, TN: Zillow predicts a 0.9% increase in median home value over the next year, with a projected 6.2% increase over the next year.
- Sevierville, TN: Zillow predicts a 0.4% increase in median home value over the next year, with a projected 7.2% increase over the next year.
- Greeneville, TN: Zillow predicts a 0.5% increase in median home value over the next year, with a projected 2.9% increase over the next year.
Other Factors That Can Impact the Housing Market in Tennessee
When the housing market is booming, it is partly caused by job growth and decreases in unemployment.The housing market is inextricably linked to the economy. The health of the economy and job growth affects real estate buyers' purchasing power. Tennessee has seen the job market increase by 1.8% over the last year.
Future job growth over the next ten years is predicted to be 41.6%, which is higher than the US average of 33.5%. Tennessee was ranked as the 11th best economy in the country in an analysis from WalletHub. The rankings included the 50 states and the District of Columbia, which ranked just ahead of Tennessee at 10th.
The state ranked fourth in terms of economic activity, fifth in terms of economic health, and 38th in terms of innovation potential. It topped the chart in terms of change in GDP from 2020 to 2021, a key factor in its economic activity ranking. Tennessee experienced 8.6% real GDP growth, trailing only New Hampshire (8.5%) and California (7.8%).
More people require housing as the population grows. This means that, in the long run, population growth drives increased demand for housing and, as a result, a strong real estate market. Population growth has a positive impact on the housing market. Middle Tennessee is an area that is constantly growing and according to the United States Census Bureau, Spring Hill in the region was among the top 10 cities for population growth.
Spring Hill was named the tenth fastest-growing city in the nation between 2020 and 2021. According to The Boyd Center for Business and Economic Research, Tennessee could grow by nearly a million people over the next 20 years and reach a total population of 7.87 million by 2040.
The number of people in their prime working years, ages 25 to 54, is projected to increase at a slower pace than the state’s population as a whole. Population growth in the state will slow over the next two decades. Between 2010 and 2020, Tennessee's population increased by 8.9 percent. It is expected to fall to 7.7 percent between 2020 and 2030. Between 2030 and 2040, it could slow even more to 6.2 percent.
The Tennessee Quarterly Business and Economic Indicators report, released by state leaders, illustrates the health of the state's economy. According to the report, 21,353 new businesses filed for the first time in the first quarter of 2022. This was an increase of more than 8% over the same quarter last year.
According to the report, 9,454 of those new businesses were registered in the state's four largest counties: Shelby, Davidson, Knox, and Hamilton. Knox County saw the greatest increase in new filings compared to last year, with 1,366 initial filings, a 14.2% increase. The report also says nominal personal income was $382.8 billion in the state during the fourth quarter of 2021, an increase of 7.4% compared to the previous quarter.
Sources:
- https://www.neighborhoodscout.com/tn/real-estate
- https://www.zillow.com/nashville-tn/home-values/
- https://www.newsweek.com/house-prices-falling-these-five-overvalued-cities-1739363
- https://fred.stlouisfed.org/series/TNSTHPI#
- https://www.bestplaces.net/economy/state/tennessee/
- https://tnsdc.utk.edu/2022/03/09/tennessee-could-add-nearly-1-million-new-residents-by-2040/
- https://www.wbir.com/article/money/economy/tennessee-economic-report-q1-2022/51-58fb9599-f0db-47ad-9316-94b102a1df54