How worried should you be?
In the last few weeks there have been several reports concerning the future of the housing market and its strength. Some point to the potential for a housing bubble based on numbers they are reporting.
One report from Realtytrac talks about home flipping and how it has exceeded the peak activity preceding the crisis about 10 years ago. They claim the problem with home flipping artificially inflates home prices, making housing less affordable and increasing the risk for trouble.
Another report created by Fitch Ratings suggests the growth in home prices is exceeding the rise in income. The report provides the example of the San Francisco/San Jose market where home prices have increased 62 % since the bottom of the housing crisis.
From what I can see, these articles are nothing but click-bait. These over-hyped headlines get people worried and then when you read the article, its light on hard data and heavy on conjecture. These type of articles are designed to get you to click so they can charge higher rates to their advertisers.
Here is the good news!
All of the statistics for the Nashville area show our market is in good shape and still improving. We have strong employment, low energy prices, low interest rates, low state taxes and 80+ people per day moving to our wonderful city.
One of the biggest indicators for the severity of a crash is the run up in price. Some of the hardest hit areas like California and Florida were seeing 50% increases in price year over year. Prices tend to fall as hard as they rose on the way to the top.
Our recent price increases in the Nashville area average 10% (or less) over the last couple of years. Some of the revitalized neighborhoods have seen increases over 20%. However, a significant investment of real money was used to renovate and build new homes in these areas That is the primary driver of increasing prices, not flipping and speculation.
And by flipping I mean, buying a home today, making no improvements and selling it for more in just a few days.
My biggest concern is the state of the national economy and stock market. While problems here will bleed over into the real estate market, they are not likely to cause a crash like we recently experienced.
While no one can predict the future with accuracy, I expect Nashville is in a good place and headed in the right direction.
Tell me your thoughts on Nashville in the comments below.
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