It's no secret that the housing shortfall has been a pressing issue for more than a decade. Since the mid-2000s housing boom, the U.S. has consistently been underbuilt compared to historical averages. Last year, we saw interest rates hit a 23-year high, exacerbating the low inventory issue and contributing significantly to affordability challenges.
This January, we saw a 4% year-over-year increase in inventory as compared to the same month last year. Compared to 2022, the Greater Nashville market has seen a substantial 22% rise in available inventory. But it is important to contextualize these numbers. Inventory levels have fluctuated significantly over the past few years. In January of 2019, inventory stood at 10,898 units, dropping to 10,348 in (Jan.) 2020, then plummeting further to 8,272 in (Jan.) 2021. Our lowest inventory levels were seen in (Jan.) 2022 at 7,225 available homes. Then, in (Jan.) 2023, inventory rebounded to 8,572 and reached 8,875 in (Jan.) 2024. And although inventory levels seem to be on the rise, we are still down almost 19% compared to pre-pandemic levels – a time when we were already using the term “housing crisis” to describe Middle Tennessee.
It is important to note that the dip in inventory numbers in 2021 and 2022 were primarily driven by interest rates. Historically low rates led to a surge in homes on the market, but the number of sales outpaced new listings. This left limited choices for consumers – especially entry level buyers without the equity to compete. Today, interest rates continue to be the influencing factor driving inventory, with many sellers hesitant to give up their current rates ranging between 3% to 4.5%.
In 2024, interest rates and inventory will continue to play major roles in our housing market. Rates are expected to remain relatively unchanged in March as the Federal Reserve closely monitors economic indicators. However, expect gradual decreases in rates in late Spring/early Summer and the latter half of the year, potentially reaching the low 6% range or even dipping into the high 5s. When this happens, it will have significant implications for inventory levels, buyer demand and median home sale prices.
Kevin Wilson is President of Greater Nashville Realtors. A Realtor is a member of the National Association of Realtors who subscribes to its strict code of ethics. You can reach Kevin at 615.390.5065 or kevin@ourhousenashville.com
