Nashville, Tennessee's average new-home sales rate has strengthened this year after late 2O22's stall. This spring, the metro's new-home pending sales index experienced its first year-over-year increases since summer 2022.
Nashville's new-home construction activity is trending back to pre-pandemic levels. Annual starts are on par with April 2019, while under-construction inventory is back down near the volume seen in March 2019. Finished vacant inventory, meanwhile, has increased to its highest number of units since March 2020.
The pullback in starts has caused lot supply to loosen a bit. Months of lot supply have increased to their highest level since February 2020.
Strengths
Nashville's average list prices for new detached and attached homes have seen little change from their peaks and continue to post year-over-year increases. Nashville was the No. 2 metro in the nation for total employment growth (46%) between 2010 and 2022.
Weaknesses
Despite some loosening in lot supply, Nashville is still significantly undersupplied for developed lots. The run-up in Nashville's home prices has caused a slight out-migration of people leaving to chase affordability in smaller Midwest markets.
Supply
Quarterly housing starts decreased 15.3% from a year ago, while the number of available vacant developed lots sits at 8,120, up 26.5% over the same quarter last year. In terms of supply-demand balance, the market area is 2.76% undersupplied.
Sales
New-home sales in the Nashville metropolitan area decreased 13.5% year over year to an annualized rate of 6,804 units in April. Over the past 12 months, 1,958 of sales were attached units, and 4,846 were detached. Existing-home closings for the 12 months ending in May posted a year-over-year decline of 37% to an annualized rate of 34,853 units.
Prices
The average list price for a new detached home in the Nashville region increased 13.3% from 2022 to $552,353 in May, while the average list price for a new attached home increased 6.9% over the same period to $363,832. Homes priced over $550,000 experienced the most closing activity over the past year. The new-home affordability ratio for a detached home reached 21.5% in April.
Economy
TotaI nonfarm employment in the area increased 3.9% from the same period last year to 1,156,900 payrolls in April. There were approximately 1,600 more jobs in April compared with the previous month, and the local unemployment rate decreased to 2.6% compared with 2.7% the previous month. April's jobless rate is lower than it was this time last year when it stood at 2.7%. Zonda forecasts the region's unemployment rate will finish the year at 2.7%.
Community
The current population of the metropolitan area is approximately 2,089,980 people and is projected to increase by 1% this year. There are approximately 817,780 households in the region, which is up 1.1% year over year. Forecasts show that current household formation is expected to increase by an annual growth rate of 4.7% by 2027. Incomes increased by 4.2% from the previous year to $76,118.
