In mid-January, mortgage rates dipped to their lowest level since September 2022, falling to 6.06% from 6.16% following a social media post from Donald Trump instructing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities.
Home buyers across the country took notice. According to data from the Mortgage Bankers Association, home loan purchase applications were 13% higher than a year ago during the week leading up to the rate drop—an early sign that even modest relief can reignite buyer interest.
While any relief for buyers is welcome news, it does not erase the fundamental challenge facing the housing market: a persistent lack of inventory. This shortage has plagued the market since the 2008 financial crisis and continues to be one of the primary drivers of affordability constraints nationwide.
In fact, renewed demand without a corresponding increase in supply could create additional hurdles for sidelined buyers. If this momentum holds into the spring when the market typically gains traction, home prices could begin to rise again, particularly in areas where available homes remain scarce.
Lawrence Yun, chief economist at the National Association of Realtors, recently cautioned against this imbalance, saying, “I’m getting a little concerned about inventory not growing strongly,” noting that the slight year-over-year gains in home listings seen in December remain very limited.
That concern is evident locally as well. In the Greater Nashville region, the most recent data shows 11,406 active listings across the nine-county market—roughly a four-month supply. Historically, five to six months of inventory signals a healthy, balanced housing market with moderate price appreciation. When demand accelerates without additional supply, however, price pressures tend to intensify, keeping affordability out of reach for many buyers.
One solution being advanced by Yun and the National Association of Realtors is modernizing the capital gains tax exemption on home sales. Established in 1997, the current exemption has never been adjusted for inflation, despite the median home price nearly tripling over that period. As a result, many longtime homeowners are discouraged from selling, effectively locking up existing inventory. Raising the exemption could help free up more homes, easing supply constraints and providing meaningful, market-based relief for today’s buyers.
Jack Gaughan 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 Jack at 615-478-0970 or jack.gaughan@gmailcom.
