WHAT'S GOING ON WITH OUR NASHVILLE REAL ESTATE MARKET????

Nervous buyers and sellers are asking some tough questions these days. Questions like:

• How do I know my home won't lose value the minute I purchase?
• When do you think the market will hit the bottom?
• Will our home prices continue to fall in Nashville?

What do these questions mean? Well, for starters no one WANTS to buy high and sell low. And buying a home is one of the single, largest investments a person makes in their lifetime. And this current market has challenged preconceptions about the stability of real estate as an investment. And most human nature is to follow, not to lead. So these questions are a healthy sign that people are waiting for someone to lead them into a buyer's market. These questions amount to: Are we there yet?

So what's the answer? I don't know. They never gave me a crystal ball in Real Estate School. Fortunately, they did give me a pretty good education on economic cycles at Vanderbilt. And the experts give me lots of advice to surf and read through. So, in an effort to answer these questions the best I can, here is some conventional wisdom:

1. You can't time the market. Trying will only make you crazy. So, if you are trying and it's making you crazy and you don't have to buy...DON'T. Wait until you are comfortable buying. Let someone else lead.
   
2. Short term investment RARELY pays as well as long term investment.  It's as true with stocks as it is with real estate. We got spoiled with 5 years of record home price increases. That meant you could buy a home with no money down, sell it in two years and still make money after closing fees and loan payoff. That was not normal. Don't bank on it happening again. The average homeowner keeps a home for 5 years. By then, you should have enough equity that, even if home values only increase moderately; you should not have to bring money to the closing table. The best advice in times where those record increases are no longer the norm - plan carefully and buy a home that will meet your needs for many years. OR plan to improve the home's value with good, old fashioned hard work. Make remodeling improvements to improve the value. Don't wait for time to do that for you.
   
3. Gains and losses are not actually realized until after money changes hands. Markets are cyclical. They go down. They go back up... You have not lost money on your home until you sell it. #2 above addresses this a little. Here's an example. If you bought 5 years ago at $100,000 (nice, easy number to work with). And your property value increased 300% by 2007 (making it worth $300,000). But prices dropped in 2008 by 50%. If you sell, you may have to sell around $150,000. Still a 50% gain over your purchase price. If you don't need to sell, you can wait until the values go back up to the 2007 level (experts predict 2 years). As long as you can make payments and don't have to sell - it makes sense to keep this home and wait out the down cycle. Some good news - in a market like Nashville, where annual increase averaged a more moderate 7% per year and the drops have only been about 5% this year, the down side is not as far down as some, more volatile markets like Vegas, CA and FL.
   
4. Market reports on price drops lag behind actual price reductions. Currently, listings in Nashville averaging over 100 days on the market before they sell. We have had drops in average sales price over the past two months of GNAR statistics (August and September) . That means prices may have been reduced as long as four and five months ago on the homes that made it into those stats. The deals are already out there. They just haven't closed yet. 

For buyers who need to buy, who are buying for the longer term (over 2 years), who can qualify for financing and who work with someone who can help them understand statistics and values in the specific neighborhoods where they are looking; there are some great properties out there. In some cases the biggest problem is narrowing down the large amount of inventory on the market into the best available options.

For sellers who don't have to sell, conventional wisdom indicates that you might want to wait out this down cycle. However, some deals may offset any downside on your sale with the upside on the purchase. Again, work with someone who can help you to identify if you can make a net gain in the entire transaction. If you can, it might be worth looking into a sale and purchase of a new home.

For investors, there are some great deals. But make sure you are prepared to put more money down than in the past and deal with much more stringent lending guidelines.

If you have questions, call. We may not have all the answers, but we are happy to help.