Nashville Homebuilders Can't Keep up with Skyrocketing Demand

• New housing sales have remained nearly flat at roughly 1,467 new homes per year, even as the demand for homes has skyrocketed.
• The median sales price of a new home in Davidson County has increased by 27% since 2015 from $339,000 to $430,920.
• The median price of a new home in Davidson County to cost $550,000 by 2025.
• The most affordable new homes in Davidson County are located in Antioch with a median sales price in 2020 of $304,400.
• Ryan Homes has been the most active home builder in Davidson County with 566 new home sales since 2015.

It’s no secret, Nashville is a booming city! Each year, more and more out-of-state residents flock to Nashville looking to establish roots and call this great city home. The desire to move to Nashville is mainly driven by how unreasonably priced other major cities are, such as; New York, Los Angeles, and Chicago. Nashville is also experiencing tremendous economic growth. The mature healthcare industry, and it’s gaining popularity as a tourism destination, help fuel the expansion. Coupled with a mild climate, and a favorable tax system, Nashville is positioned well for more years of growth and expansion.

All of this economic growth may lead one to believe new home construction is growing at an equal rate. That simply isn’t the case. Over the past five years, the number of new homes being built has remained constant at around 1,450 per year. The lack of supply, and an increasing amount of demand, has caused house prices to rise at a record pace - and there are no signs of this slowing down any time soon.

What’s Leading To Growth In Nashville?

A lower cost of living

Compared to New York, Los Angeles, or Chicago, $430,920 for a brand new home seems like a downright steal. Not to mention for that price, you can enjoy being just 15 minutes away from Downtown Nashville while still enjoying the advantages and luxuries of suburban life. Your money will certainly go further in Nashville in part due to the local tax environment which we will touch on in just a bit.

The trend of moving from more expensive cities to more affordable cities is nothing new although we’ve seen this trend accelerate in part due to more flexible working conditions. The COVID-19 pandemic has further accelerated the desire for millions of Americans to leave packed cities in search of single-family homes, with backyards, in a suburban environment. More and more companies are becoming more flexible with working from home, which in return, has people looking to leave their small bungalows or apartments in San Francisco for spacious single-family homes in Nashville.

A favorable tax environment

Taxes. Emotions run through your mind when you hear that word. If you feel like you pay too much money in taxes, you’re not alone. Our friends to the north, west, and south of us all feel the same way.

For many reasons, the tax environment is favorable throughout all of Tennessee. The vast majority of clients we take on from out of state mention they moved to Tennessee because:

1. There is no state income tax. If you’re from New York, this can really hit home!
2. There is no state tax on retirement accounts, such as; pensions, or 401-k’s.

These reasons not only make Nashville a great place to kick your career off and start a family, but it makes it equally as popular with retirees.

Property taxes in Davidson county increased by 34% recently from $3.155 to $4.221 per $100 of a property’s assessed value. While this may seem like a large increase, Nashville’s property taxes are still lower than similar cities such as Charlotte and Atlanta.

Thriving economy

Nashville’s local economy is thriving! It seems like every other month, another fortune 500 company announces plans to move their headquarters to Nashville. Just in the past couple of years, Nashville has welcomed AllianceBernstein, iHeartMedia, The Daily Wire, and many other large companies. Nashville will also be home to a new Amazon Operations Center located in The Gulch that promises nearly 5,000 six-figure jobs.

How Many New Homes Are Built Each Year?

Davidson County has averaged 1,467 new homes per year over the last five years. While this may sound like a lot, it pales in comparison to the demand for housing in the county. By the last measure, over 100 people were moving to Nashville each day. The city certainly does have a robust makeup of older homes, it’s still important to note new home sales make up a shockingly small percentage of total sales.

As alluded to above, new home construction isn’t keeping up with the demand Davidson County continues to experience. Dating back to 2015, new construction has remained relatively stagnant.

As basic economics tells us; when supply doesn’t match demand, expect the price to increase. That holds true to the prices of homes, as new home prices have jumped 27% over the past five years.

What’s The Most Affordable Neighborhood To Buy A New Home In Davidson County?

Luckily for home buyers, the most affordable neighborhood in Davidson County, Antioch also happens to be the place most builders are focused on. In the past 5 years, over 1,150 new homes have been built in this up-and-coming neighborhood and the median sales price for a new home in 2020 was a reasonable $254,267.

Who Are The Most Active Home Builders In Davidson County?

The most active home builders in Davidson County made up 18.5% of all new homes built in the past 5 years. They typically prefer to build 3 bedrooms, 2.5 bathroom homes which appeal mostly to growing families. The most active builders over the past five years are:

What Was The Most Expensive New Home Sold In Davidson County?

The most expensive new home in Davidson County closed in August 2020 and brought in $4,500,000. This custom home was built by Cates Builders and includes features such as an inground pool, French reclaimed oak floors, and sits on nearly an acre of land.

What Should We Expect In 2021?

If history is any predictor, we should expect the number of new homes constructed in Davidson County in 2021 to remain fairly constant at just over 1,400. Given the small number of new home sales, it is likely home prices will continue to rise as the housing supply is further squeezed. At this rate, by 2025 the median price of a new home in Davidson County could reach almost $550,000. At that rate, would Nashville lose some of its appeal for being an affordable city? Or, would the climate, culture, convenience, and tax incentives continue to attract more and more Americans?

About Felix Homes

Felix Homes is a local low-commission real estate brokerage. What does that mean? For home sellers, we charge a 1.5% commission compared to the 3% the vast majority of agents charge. This low fee, on average, keeps $12,375 of profit in the home seller's pocket!

Not only do we save our clients money when we sell their homes, but we also save them money when they choose to buy a home. We believe a 3% buyers commission is ridiculous, and only charge 2%.

Less Expensive Doesn’t Mean Less Attention

Just because we offer to buy and sell homes for a lower commission doesn’t mean you, as our client, will receive a lower quality of service. At Felix Homes, our dedicated real estate agents will walk you through the entire process from start to finish. Our business model is different, and all our agents do is focus on you, the client. Behind the scenes, we have a marketing, writing, finance, and technology team that focuses on running the business.

Our unique business model allows us to maximize efficiency, ultimately enabling us to sell more homes than the average real estate agent in the area. If you’re looking to buy or sell a home in the Nashville area, contact us at contact@felixhomes.com or 615-354-5731.