A Small Win For Nashville’s Housing Affordability! [August 2024 Market Update]

August Market Stats

August Key Takeaways

😳 - August 2024 had 20% fewer closings than August 2023 – buyers just aren't buying.

💩 - The number of new listings added to the market remains pretty consistent with past years but the lack of buyers is causing total inventory to rise.

🔻 - The 30-year mortgage rate plummeted in August going from 6.90% at the end of July to 6.34% just a couple weeks later!

💸 - With lower rates and flat prices, home affordability is starting to look slightly better – although the average monthly mortgage payment is still 20% more than it was back in 2022.

August In-Depth Analysis

Supply-Side:

Starting off with the supply side of the market, the number of new listings added in August 2024 was 1,155. This is about 150 listings fewer than both August 2023 and 2022 (See chart below).

For those of you rooting for home prices to increase, fewer homes coming to the market is a welcomed sign.

I expect to see the number of new listings added each month begin to decrease from now until the end of the year as most home sellers prefer to time their sales to take place in the spring or summer months.

I like to think of the chart above as more of a snapshot in time – a single picture.

The chart below on the other hand is like a video – it shows the aggregate number of new listings added to the market each month since January.

In my opinion, looking at the aggregate chart is a better representation of overall supply. Since January 2024, 10,435 new listings have been added to the market – nearly identical to the market in 2022 (See chart below).

So, supply continues to look fairly normal, but what about demand? Taking a look at the total inventory chart, we can see that something is off (See chart below).

Inventory in Davison County began to climb starting in March and the gap has continued to widen compared to 2023 and 2022.

For example, in August 2024, the total inventory on the market was 3,479. August 2023 on the other hand saw a total inventory of 3,117. So, there are roughly 10% more listings on the market now compared to this time last year.

Demand-Side:

Why is total inventory climbing if the number of new listings added each month is about the same as in years past? It comes down to demand.

June, July, and August have all been disappointing months in terms of demand. August 2024 had just 669 closings – 20% fewer than August 2023 (See chart below).

Whether it's due to high interest rates, the upcoming presidential election, geopolitical uncertainty, or all of the above – buyers just aren't showing up to the table.

My prediction is that we'll end the year with just over 7,700 closings compared to 8,284 in 2023 and 9,968 in 2022.

Supply vs Demand:

Now that we've analyzed the supply side of the market and the demand side of the market separately, it's time to tie them together.

The months of supply is arguably the most important statistic in real estate as it determines how long it would take to sell all the homes currently on the market if the current sales pace and inventory levels remained the same.

We noticed an unusual spike in the months of supply in June (See chart above). While still elevated, it has begun to level off.

As of August 2024, months of supply was 4.51. In other words, it would take approximately four and a half months for the inventory to dry up given the current pace of closings.

My prediction is that we'll end the year with months of supply well over 5 which would be a welcomed sign for buyer's hoping to purchase a home. After all, more choices and less competition among other buyers generally lead to better terms and lower prices.

Home Prices:

The median and average home prices tell two different stories. On one hand, the average sales price in Davidson County continues to climb – up nearly 6% compared to a year ago. The median home price on the other hand is flat. Why you ask?

I attribute this to the handful of extraordinarily expensive home sales taking place in specific enclaves of Davidson County such as Green Hills, Belle Meade, Forest Hills, and Oak Hill. These sales, many of which are paid in cold hard cash, continue to push up the average home price.

Rest assured that for the typical home buyer or seller in Davidson County, prices have remained relatively flat since early 2022.

Mortgage Rates:

Mortgage rates saw some much-needed relief in August! The same day that the stock market fell nearly 600 points in early August, the mortgage market had a similar correction.

On Thursday, July 25th, the average 30-year fixed rate mortgage was 6.90%. By August 5th, the rate plummeted to 6.34%!

For those of you who are expecting mortgage rates to drop another 0.25% after the Fed's rate cut this September – don't get too excited. The mortgage market has already priced in the cut.

That being said, it's likely rates will continue to come down over the next 6-12 months. My prediction is that we'll see the average 30-year mortgage in the high 5% range in 2025.

Affordability Check-In:

I've decided to change up my affordability analysis slightly by taking the median sales price into consideration.

August's affordability analysis offers a glimmer of hope for those of us asking for more affordable real estate.

Even accounting for the slight increase in median sales price since 2022, the monthly payment (assuming a 20% down payment) in August 2024 is $136 lower than in August 2023!

We're still nowhere near 2022's affordability but it's a step in the right direction.

Using my old analysis which assumes a loan amount of $500,000, the affordability looks even better! August 2024's monthly payment comes in at $190 less than August 2023's.

About Felix Homes

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If you have any questions about the state of the market or the home buying/selling process, please feel free to contact us at contact@felixhomes.com or 615-354-5731.