What's Attracting Investors to Nashville's Real Estate Market in 2020?

The housing market in Nashville hit a historic high last year, while the Nashville metro area is predicted to be the fourth hottest housing market in 2020.

The growing job market and low unemployment rate helped make Nashville one of the top markets for rent growth last year, with a similar growth in rents expected this year as well.

Nashville is the capital of Tennessee and the most populated city in the state. Located in the heart of the Tennessee Valley, the city played key roles in both the Revolutionary War and Civil War, and quickly became a center for transportation and manufacturing.

Nicknamed “Music City,” Nashville today is a major center for the music industry. Manufacturing and transportation still play a key role in the city’s diverse economy, along with the education, healthcare, financial services, and corporate headquarters sectors.

In this article we’ll explore in detail what rental property investors need to know about the Nashville real estate market in 2020.

>>Explore Roofstock's Nashville Investment Properties here.

 

Population Growth

The population of the Nashville region continues to surge, according to the Nashville Business Journal, with five of the counties in Greater Nashville expected to see population growth of more than 50% by 2045. 

Key Population Stats:

  • City of Nashville is home to over 692,000 residents with more than 1.9 million people living in the 10-county Greater Nashville Region.
  • Nashville is the capital of Tennessee and the most populated city in the state.
  • Counties in the Greater Nashville Region include Davidson County (where Nashville is located), and Rutherford, Williamson, and Sumner counties.
  • Major cities in the metropolitan area include Nashville, Murfreesboro, and Franklin.
  • Also known as the Midstate region, the Nashville area is expected to grow by over 500,000 people in the next 20 years.
  • Nashville is ranked 7th among the large metro areas gaining the most young professionals.
  • Median age in Nashville is 34 years vs. the Tennessee median age of 39.

 

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Job Market

The Nashville metro area remains the growth center of Tennessee, according to Kiplinger, with the region’s employment gain coming in at 2.2% last year. The financial publication forecasts job growth in the state to be 0.9% this year, with Amazon adding up to 5,000 new jobs at its Nashville hub.

Key Employment Stats:

  • The GDP of Nashville-Davidson-Murfreesboro-Franklin MSA is over $132.2 billion, according to the Federal Reserve Bank of St. Louis, and has grown by over 59% since 2010.
  • Nashville Post reports the area GDP grew by more than 6% in 2018, more than double the growth rate of the entire U.S.
  • Job growth in Nashville last year was 3.1%.
  • Nashville MSA has experienced job growth of 26% over the last 10 years, making the region the 2nd-fastest growing metro economy in the country.
  • Unemployment rate in Nashville is 2.4% with a regional labor force participation rate of 68.9%.
  • Target industries in Nashville include health care, music and entertainment, advanced manufacturing, corporate operations, and supply chain management.
  • Companies with corporate headquarters in Nashville include Bridgestone Americas, Dollar General, HCA Healthcare, and Ryman Hospitality Properties.
  • Top employers in the Greater Nashville Region include Vanderbilt University Medical Center, HCA Healthcare, Trane Company, Nissan North America, Middle Tennessee State University, and Amazon.
  • Nashville MSA is home to 20 accredited four-year, two-year, tech schools and postgraduate institutions including Vanderbilt University, Tennessee State University, Nashville State Community College, and Belmont University.
  • 88.3% of the Nashville residents have a high school degree or higher, while 39.7% hold a bachelor’s degree or advanced degree.
  • Interstate highways I-24, I-40, and I-65 converge in Nashville, putting the region within a 2.5 hour drive of 12 million people.
  • CSX Transportation provides freight rail service with two major rail yards in Nashville.
  • Port of Nashville on the Cumberland River provides access to the Ohio and Mississippi Rivers and the Gulf of Mexico.
  • Nashville International Airport (BNA) is one of the fastest growing top 50 airports and the 33rd busiest in the U.S., providing service to nearly 16 million passengers each year.

 

Real Estate Market

The Nashville housing market hit an historic high last year, with home sales volume up 7% even while sales prices continued to rise. In fact, Nashville is projected to be the 4th-hottest housing market in the U.S. this year, ahead of favorite sunbelt cities like Phoenix and Dallas, according to a report on the WKRN.com local news website.

Key Market Stats:

  • The median listing price of a house in Nashville is $329,000 while the median selling price is $288,500 according to Zillow (as of January 2020).
  • Square foot listing price in Nashville is $192 vs. $161 per square foot in the Nashville-Davidson-Murfreesboro-Franklin Metro area.
  • Home values in Nashville increased by 4.1% last year and by over 80% since April 2012 based on the Zillow Home Value Index.
  • Average days on market is 70.
  • During the listing period 10.3% of the houses for sale in Nashville have a reduction to the listing price.
  • 5.4% of the homes in Nashville have a negative equity vs. 8.2% nationally.
  • 0.6% of the homes in Nashville have a delinquent mortgage vs. 1.1% U.S. average.
  • The Germantown neighborhood in Nashville has the highest home values while the Elizabeth Park neighborhood has the lowest home values.


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Strong Renters’ Market

Nashville was among the top markets for rent growth last year and will remain one of the leading markets for rent increases in 2020, according to Fox 17 Nashville. The report notes that high wage jobs and a low unemployment rate are fueling the demand for places to rent.

Key Market Stats:

  • Median rent in Nashville is $1,675 per month vs. $1,643 per month for the Nashville-Davidson-Murfreesboro-Franklin Metro area.
  • Rents in Nashville increased by an average of 7% over the past year, according to RENTCafé.
  • 46% of the housing units in Nashville rent for between $1,001 and $1,500 per month.
  • Nearly 46% of the households in Nashville are renter-occupied.
  • Neighborhoods in Nashville with the lowest rents include Airport Estates, Bayview, and Belair where rents average $1,021 per month.
  • Neighborhoods in Nashville with the highest rents include Burton Valley, Forest Hills, and Tyne Meade where rents average $2,231 per month.

 

Historic Price Changes & Housing Affordability

The potential for equity appreciation and rental yield are two financial metrics real estate investors consider before buying rental property. 

The historic change in home prices in an area can provide an indication of the possibility of property appreciation over the long term, while the housing affordability index is one indicator of how strong the demand for rental property may be in a given market.

Each quarter the FHA releases up-to-date data on the change in home prices for all markets across the U.S. The most recent FHA 2019 Q3 House Price Index report for the Nashville-Davidson-Murfreesboro-Franklin MSA shows:

  • Since Q1 1991 homes prices have increased by 264.73% 
  • Over the past five years home prices have increased in Nashville by 51.57%
  • Over the past year prices have increased by 5.3%
  • Over the last quarter home prices in Nashville have increased by 1.09%

The National Association of Realtors Housing Affordability Index (HAI) can be used to gauge the potential demand for rental property in a market. 

When analyzing the affordability of housing in a market, the NAR compares the median family income to the median price of an existing single-family home and assumes the purchase will be made using a conventional loan with a down payment of 20%.

Based on the NAR’s latest report, the HAI for the Nashville-Davidson-Murfreesboro-Franklin MSA was 151.6 in 2018, the most recent year available. This means a family has a little more than 1.5X the median income needed to purchase a median priced, single-family resale home in the Nashville metro area.

 

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Quality of Life

As the official Nashville Visitor and Tourism website says, “If cities had soundtracks, Nashville’s would be like no other.” Live music of all types is performed seven nights a week, and with more than 180 recording studios and 5,000 working musicians Nashville is known around the world as Music City.

Of course, there’s more to Nashville than just music. The metro area is home to pro sports teams, a huge park system, and famous attractions such as the Parthenon and Nashville’s Hot Chicken restaurants.

Key Quality of Life Stats:

  • Forbes ranks Nashville as the 14th best place for job growth, 15th best place for business and careers, along with high scores for education and cost of doing business.
  • Nashville is ranked by WalletHub as the 52nd best city for jobs in 2020.
  • The city’s vibrant arts and entertainment scene are two of the reasons why U.S. News & World Report lists Nashville as one of the 10 most desirable cities for Millennials.
  • Business magazine Fast Company explains why so many Millennials are flocking to Nashville.
  • Niche.com ranks Nashville #60 as the best city for young professionals in America, with high scores for diversity, nightlife, housing, and family living.
  • U.S. News also ranks Nashville as the 15th best place to live in the U.S. and the 8th best place to retire, giving the Music City high ratings for desirability, value, job market, net migration, and quality of life.
  • Climate in Nashville is generally mild with hot humid summers and cool winters.
  • Vanderbilt University Medical Center and St. Thomas West Hospital are ranked as two of the best healthcare facilities in Nashville.
  • Pro sports teams in Nashville include the NFL Tennessee Titans and NHL Nashville Predators.

 

Get Out the Map

Where to begin your search? Roofstock created a heat map of Nashville based on our Neighborhood Rating, a dynamic algorithm that enables you to make informed investment decisions by measuring school district quality, home values, employment rates, income levels and other vital investment criteria.

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DARK GREEN: 4-5 star neighborhood
LIGHT GREEN: 3.5-4 star neighborhood
YELLOW: 2.5-3 star neighborhood
ORANGE: 2 star neighborhood
RED: 1 star neighborhood

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Jeff Rohde

Author

Jeff Rohde

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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