Tennessee is currently a seller's market, with homes selling quickly and for more than they are worth. According to Zillow, the typical home value (or ZHVI) in Tennessee is $303,453. Tennessee home values have gone up 26.1% over the past year. Although this is the statewide trend, each city and town is unique, which is why it's best to consult with a local real estate agent to better understand trends in your area.
Home sales are starting to drop in Tennessee as a result of the recent spike in interest rates. Affordability has also become a significant issue. As a result, the number of home sales has decreased with buyers taking a pause from the market. The most recent findings from Moody's Analytics indicate that, on a national scale, housing prices currently exceed their long-run fundamental values by more than 25 percent.
This represents the highest level in the history of record-keeping, which spans more than 30 years. Nashville-Davidson-Murfreesboro-Franklin, Tennessee is among the top major metropolitan regions with the most overvaluation of housing prices. In this MSA, home values are overvalued by 63.1%. According to Zillow, Nashville-Davidson–Murfreesboro–Franklin Metro home values have gone up 31.6% over the last twelve months and will rise by 5.3 by the end of July 2023.
Tennessee Real Estate Appreciation & Forecast
Investing in Tennessee real estate is a good idea, especially in Nashville and Memphis, where there is always a high demand for housing. According to Neighborhoodscout, the Tennessee real estate APPRECIATION RATE in the previous 12 months (2021 Q1 – 2022 Q1) was among the highest in the country as the median price went up by 25.15%. APPRECIATION RATE was 5.06% between 2021 Q4 and 2022 Q1. Prices have risen by 36.15% in the last two years and 160.71% since 2000.
- MEDIAN HOME VALUE: $254,096
- AVERAGE RENT: $1,401 per month
- OWNERS = 65%
- RENTERS = 35%
All-Transactions FHFA House Price Index for Tennessee (Quarterly)
- Q2 2022: 603.52
- Q1 2022: 559.59
- Q4 2021: 532.41
- Q3 2021: 506.26
- Q2 2021: 474.11
Here's Zillow's forecast for some of the metro areas in Tennessee. None of these MSAs of Tennessee is predicted to see a home price decline in 2023. Rising home values and listing prices, combined with limited inventory, indicate that Tennessee's housing market is tilted toward sellers. This trend is likely to continue for the foreseeable future unless inventory grows faster than demand or rising interest rates completely dampens the demand to that extent.
- Nashville, TN home values are forecasted to rise 5.3% between July 2022 to July 2023.
- Memphis, TN home values are forecasted to rise 5.2% between July 2022 to July 2023.
- Knoxville, TN home values are forecasted to rise 6.2% between July 2022 to July 2023.
- Chattanooga, TN home values are forecasted to rise 5.1% between July 2022 to July 2023.
- Kingsport, TN home values are forecasted to rise 3.3% between July 2022 to July 2023.
- Kingsport, TN home values are forecasted to rise 6.4% between July 2022 to July 2023.
- Johnson City, TN home values are forecasted to rise 3.4% between July 2022 to July 2023.
- Jackson, TN home values are forecasted to rise 5.4% between July 2022 to July 2023.
- Cleveland, TN home values are forecasted to rise 6.2% between July 2022 to July 2023.
- Morristown, TN home values are forecasted to rise 4.5% between July 2022 to July 2023.
Other Factors That Can Impact the Housing Market in Tennessee
When the housing market is booming, it is partly caused by job growth and decreases in unemployment. The housing market is inextricably linked to the economy. The health of the economy and job growth affects real estate buyers' purchasing power. Tennessee has seen the job market increase by 1.8% over the last year.
Future job growth over the next ten years is predicted to be 41.6%, which is higher than the US average of 33.5%. Tennessee was ranked as the 11th best economy in the country in an analysis from WalletHub. The rankings included the 50 states and the District of Columbia, which ranked just ahead of Tennessee at 10th.
The state ranked fourth in terms of economic activity, fifth in terms of economic health, and 38th in terms of innovation potential. It topped the chart in terms of change in GDP from 2020 to 2021, a key factor in its economic activity ranking. Tennessee experienced 8.6% real GDP growth, trailing only New Hampshire (8.5%) and California (7.8%).
More people require housing as the population grows. This means that, in the long run, population growth drives increased demand for housing and, as a result, a strong real estate market. Population growth has a positive impact on the housing market. Middle Tennessee is an area that is constantly growing and according to the United States Census Bureau, Spring Hill in the region was among the top 10 cities for population growth.
Spring Hill was named the tenth fastest-growing city in the nation between 2020 and 2021. According to The Boyd Center for Business and Economic Research, Tennessee could grow by nearly a million people over the next 20 years and reach a total population of 7.87 million by 2040.
The number of people in their prime working years, ages 25 to 54, is projected to increase at a slower pace than the state’s population as a whole. Population growth in the state will slow over the next two decades. Between 2010 and 2020, Tennessee's population increased by 8.9 percent. It is expected to fall to 7.7 percent between 2020 and 2030. Between 2030 and 2040, it could slow even more to 6.2 percent.
The Tennessee Quarterly Business and Economic Indicators report, released by state leaders, illustrates the health of the state's economy. According to the report, 21,353 new businesses filed for the first time in the first quarter of 2022. This was an increase of more than 8% over the same quarter last year.
According to the report, 9,454 of those new businesses were registered in the state's four largest counties: Shelby, Davidson, Knox, and Hamilton. Knox County saw the greatest increase in new filings compared to last year, with 1,366 initial filings, a 14.2% increase. The report also says nominal personal income was $382.8 billion in the state during the fourth quarter of 2021, an increase of 7.4% compared to the previous quarter.
Sources:
- https://www.neighborhoodscout.com/tn/real-estate
- https://www.zillow.com/nashville-tn/home-values/
- https://www.newsweek.com/house-prices-falling-these-five-overvalued-cities-1739363
- https://fred.stlouisfed.org/series/TNSTHPI#
- https://www.bestplaces.net/economy/state/tennessee/
- https://tnsdc.utk.edu/2022/03/09/tennessee-could-add-nearly-1-million-new-residents-by-2040/
- https://www.wbir.com/article/money/economy/tennessee-economic-report-q1-2022/51-58fb9599-f0db-47ad-9316-94b102a1df54
