In today’s national real estate market where once-sleepy mid-sized cities like Raleigh, Tampa and Nashville are now the latest hotspots seeing unprecedented growth in population and housing prices, the one big question I continue to hear is when will this bubble burst?
This resurgence of takes that another crash is coming is worth exploring, but is a crash really coming?
Let’s start by looking at the fast-growing city of Raleigh, NC.
The second-largest city in the state, Raleigh has seen home prices trending up 15.9 percent year over year. In May 2022, Raleigh home prices were up 19.4 percent, compared to last year, selling for a median price of $430K.
Home values in Raleigh are expected to increase by nearly 24% – leaving only Tampa and Jacksonville, Florida expected to experience greater home value appreciation through November 2022, according to an analysis from Zillow.
Similar to Raleigh in size and population growth, Nashville’s housing market is experiencing the same growing pains causing observers to wonder, when will the momentum lose steam and what will the fallout look like if that happens?
Contrary to the popular opinion that this signals a crash, we’re already seeing signs of a market correction being driven primarily by the Federal Reserve.
With inflation hitting its highest in 40 years, the Fed recently raised interest rates by 0.75%, the largest increase since the 1990s and further rises are expected to come by the end of the year.
The aggressive action from the Fed has resulted in the market reverting to trend and can be seen in rising inventory and closings making a downward turn in April and May.
In Greater Nashville, inventory reached its highest since November 2020 and closings were down two percent. Between March 26 and May 27, nationwide inventory levels rose 10 percent.
Rising inventory is a key indicator of a cool down and while prices are expected to continue rising at a slower rate than what we’ve seen over the last two years – buyers are now getting some much-needed relief and gaining some power back in the market.
With rates set to get a few more spikes before the year’s end, the market should balance out, but that’s just one ingredient toward reaching a healthier market. What will deliver us to a more balanced market is aggressively increasing our housing supply.
Recent estimates suggest the United States has under-built 5.5 million condos and single-family homes over the last twenty years.
The Greater Nashville area is leading the charge in this regard with Nashville ranked in the top five metro areas with the most single-family building permits issued per 10,000 people.
While this is a step in the right direction, if we want to see the market swing in a more balanced direction, the top priority on everyone’s mind needs to be ramping up new home construction to supplement the lack of supply.
Eva Angelina Romero was born and raised in Los Angeles, California and made the move to Nashville in 2012 with her husband. In 2013, Eva obtained her Brokers license and also launched Solace Oral Surgery. She is the current Broker/Owner of EvaCO properties and also co-owner of Solace Oral Surgery and Solace Mobile Oral Surgery.
