Writer: Joey Garrand
2 min read June 2021 — With nearly 80 people moving to the Nashville MSA each day, the region’s residential real estate activity combined with low interest rates and the challenge of low inventory has created an unprecedented, chaotic marketplace for homebuyers.
“It is the craziest insanity,” said John Floyd, founder and owner of Ole South Properties, in an interview with Invest:. “We don’t even put a house on the market. When we’re almost finished with a house, there are already 10 or 15 people who want to buy it.”
Of course, Ole South Properties and other homebuilders in the region would rise to match the demand, but supply chain issues are preventing that. “We could do 2,000 homes this year if we had the lots and all the materials and labor, but none of that is available. We can’t control our destiny at this point because the supply chain is not stable. It’s creating chaos in our business. And it’s not that we don’t have buying power; we built 1,040 houses last year. It’s just that we’re not in control.”
The supply chain isn’t the only cause of low inventory: investment firms are taking advantage of low interest rates and buying a tremendous number of properties, “As in so many markets, investment firms and property management companies scoop up anything under $350,000-$400,000 and create a huge rental pool. They’re expanding their rental portfolios and taking entire neighborhoods that were once cute, first-time homebuyer neighborhoods and creating rental neighborhoods,” said Christie Wilson, broker/owner at The Wilson Group Real Estate Service, in an interview with Invest:.
Floyd also commented on this trend of tremendous home-buying activity from investment firms. “Some companies are asking us to sell entire sections of our subdivisions, or in some cases the entire project.” Floyd noted that the business of investment firms buying homes has “been going on for quite a while, but right now it’s just crazy.”
For first-time homebuyers, this market is brutal. Wilson explained, “If many of these first-time homebuyers don’t have parental help or aren’t in a big paying job, they are priced out of the market. Our first-time homebuyer market has been decimated by these investment firms coming in and buying up that kind of property. And this didn’t start yesterday. My first phone call was in 2014, when an investment company called me and said, ‘We want to buy 1,000 homes in Middle Tennessee.’”
Yet another component of the residential crisis in the Greater Nashville region is the lack of building throughout previous years. “The lack of building over the last 14 years has been truly staggering, and demand has really outpaced supply. There has been (and currently is) a lack of new construction for single-family homes in all price points,” said Wilson.
Part of the reason as to why supply has lagged since the Great Recession is the pure damage and trauma the recession caused the homebuilding industry. “When the recession hit from 2008 through 2011, that wiped out a lot of the local midsize builders,” said Floyd,
Going forward, the outlook doesn’t look rosy for homebuyers, “The building business for the next year and a half is going to be completely crazy. I don’t see anything but a continuation of demand. It’s a great time to be a seller; it’s a horrible time to be a buyer,” Floyd said.
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