Is Nashville's Housing Market About To Implode? [July 2024 Market Update]

July Market Stats

July Key Takeaways

😳 - Months of Supply spiked to 4.61! The only times it's been higher in the past 5 years were January 2023 (4.95), November 2023 (4.67), and January 2024 (4.84)!!!

💩 - Buyer demand is in the dumps with only 649 closings in July 2024 – 24% fewer closings than in July 2022

🔻 - The average rate for a 30-year mortgage came down to 6.85% in July and spoiler alert – rates have come down even further since then – 6.62% as of August 2nd!

💸 - Interest rates would have to come down to 5.25% for a family earning $120,000 per year to comfortably afford the median-priced home in Davidson County ($530,000).

July In-Depth Analysis

Supply-Side:

Starting out with the supply side of the market, it's evident that we haven't experienced much of a change in the number of new listings being added to the market each month.

There were 1,103 new listings added last month compared to 1,125 in July 2023 – a nominal change. (See chart below).

This chart can be viewed as a "snapshot" of each month, but what if we look at the bigger picture and analyze the number of new listings added since January?

Currently, we're on pace to match the number of new listings that were added to the market in 2022. Assuming this pace will keep up through December, it will put us at a total of just under 14,400 listings added for the year. (See chart below).

Total inventory starts to account for the demand side of the equation since it includes closed listings as well as stale listings that carry over each month.

This is where things start to look ugly!

We've already determined that the number of new listings added to the market each month is on pace to match 2022. But, listings are not being taken off the market at the same pace, causing total inventory to climb.

At the end of July, there were just under 3,500 listings on the market compared to around 3,000 by this time in 2022. (See chart below).

Demand-Side:

The issue in the equation is a lack of demand. This is further supported by the collapse in the number of closings in 2024.

July 2024 saw just 649 homes close in Davidson County – a staggering 24% fewer closings than in July 2022 and just under 14% fewer closings than in 2023.

The aggregate picture isn't looking too much better. Keep in mind that supply is at a 2022 level but demand is nowhere close. I estimate we'll end the year with under 8,000 closings in 2024 compared to nearly 10,000 closings in 2022.

Supply vs Demand:

So, we've got a case of increasing supply and decreasing demand. In last month's market update, we spoke at length about the "months of supply" – a metric used in real estate to measure the balance between supply and demand.

This metric, while seasonal, was keeping pace with the 2023 numbers. For example, in May 2023, the months of supply was 2.59 – only a smidge lower than May 2024 at 3.10.

But, in June 2024, months of supply spiked. June has historically welcomed a low "months of supply," so seeing such a large increase was a shock!

If we thought June was ugly, then we weren't prepared for what we were going to see in July – months of supply hit 4.61 (See chart above)!

The only times it's been higher in the past 5 years were January 2023 (4.95), November 2023 (4.67), and January 2024 (4.84)...but that's not surprising in the winter – we're in July!!!

Home Prices:

Home prices continue to increase. The median sales price came in at $530,000 in July 2024 compared to $499,900 in July 2023.

Sellers, don't celebrate just yet...the median sales price only accounts for CLOSED transactions. It does not include the stale listings that have been rotting away on the market for months on end.

Also, the median sales price figures do not account for "seller credits" (i.e. the seller contributing money towards the buyer's closing costs). It's not uncommon in this market for the seller to contribute 1% - 3% of the home price to incentivize buyers to make an offer.

Mortgage Rates:

The saving grace is that mortgage rates have finally started to show some relief. We ended July with an average 30-year fixed rate of 6.848% and spoiler alert – they've come down even further since then, 6.62% as of August 2nd!

Will lower rates bring buyers back to the market?!

Affordability Check-In:

Homes have remained just as unaffordable as they were in July 2023. Is this the new normal? Are high monthly payments something buyers just need to get used to?

If not, one of two things needs to happen – either prices come down or interest rates come down. It's that simple.

Let's say you're a household earning $120,000 per year. A good rule of thumb is that your housing expenses (principal, interest, property taxes, and insurance) shouldn't exceed 28% of your pre-tax income. This translates to around $2,800 per month on housing.

The median price of a home in Davidson County was $530,000 in July. Let's say you put down 10% and finance $477,000. You would need an interest rate of 5.25% to comfortably afford the house.

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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.