Nashville falls in new economic rankings as housing costs and job growth limit opportunities
Writer: Mirella Franzese
January 2025 — After sluggish job growth and a growing shortage of affordable homes, Nashville fell to No. 20 in the Milken Institute’s “2025 Best-Performing Large Cities” ranking, down 14 spots from the previous year when it finished in the top 6.
This year’s ranking also led to Nashville losing its Tier 1 classification — defined as high-population growth areas with superior development and living standards — and dropping to Tier 2, which includes cities with mid-level growth and populations between one and five million.
“We have 13 metrics that are divided into three categories: One is labor market performance. Second one is high tech performance, and the third one is access to economic opportunities,” explained Milken Institute Associate Director of Research Brock Smith in an interview with WKRN News 2.
The report, which measures economic growth based on job growth, wage growth, and affordable housing, highlights some of Music City’s most pressing challenges for 2025 and beyond.
Previously, Nashville’s economy relied on strong wage growth, job creation, and GDP growth in the high-tech sector for the achievement of its No. 6 ranking. However, Nashville’s recent drop was due in part to stagnant job growth from July 2023 to July 2024, during which the city fell130 spots to No. 150.
“That tends to be a pretty volatile measure,” conceded Smith. “It’s entirely plausible that that bounces right back up and Nashville goes back in the top tier next year, or it could be, you know, the start of a trend.”
In Tennessee, employment growth slowed down considerably, with new job additions falling from 58,000 to an estimated 22,500 year over year. Further reductions are expected in 2025.
“The state continues to add workers, but job gains have slowed,” said Larry Kessler, research associate professor at the Boyd Center in an article by the University of Tennessee Knoxville. “Still, around 184,000 more people are working in Tennessee today than there were prior to the pandemic.”
Like many U.S. cities, Nashville continues to face challenges from rising home prices and a shortage of affordably-priced homes. The city ranked No. 88 in the “Housing Affordability 2023 Rank.”
Since December 2023, Nashville’s median home sales price rose to $469,000, a 6.2% increase from the previous year. High-demand neighborhoods such as East Nashville, The Gulch, and Green Hills saw even higher price increases.
Supply remains a challenge, with active listings down 4% from the last year and new developments struggling to keep pace with demand as a result of rising land prices and material costs.
“Nashville does still respectably in housing affordability, but it did see really big housing price increases in 21 and 22 — that was the whole country did, mainly, but Nashville is even more than average, and so that’s one thing I think policy makers should focus on if they want to bounce back, try to make sure housing affordability doesn’t kind of slip away from them,” said Smith.
Despite these challenges in the residential market, Nashville saw positive growth across most of its economic sectors, including finance, business, technology, and professional services. Additionally, Milken Institute’s report ranks as many as 200 large cities, split into five different tiers, and Nashville’s Top 20 placement still signals a position of economic strength.
“Overall for Nashville, the kind of big picture, it does very well in growth, in kind of the most important sectors,” said Smith. “When I look at kind of sector by sector growth, Nashville had the highest shares and and really strong, like five year growth in the finance sector, the information sector, professional and business,” said Smith. “Those tend to have a lot of high tech employment, with a lot of opportunity for future growth and high wages.”
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