What's Attracting Investors to Nashville's Real Estate Market in 2021?

Nashville is ranked as the 4th best real estate market in the U.S. by WalletHub. The ranking is based on key investment criteria including activity in the real estate market, growth in property values, and strength of the local economy. Experts expect the real estate market in Nashville will continue to grow through 2021, with inbound migration keeping the rental market in Nashville robust.

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 2021.

>>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 nearly 700,000 residents with more than 1.9 million people living in the 10-county Greater Nashville Region.
  • Population of Nashville has grown by 1.46% year-over-year.
  • 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 household income in Nashville is $70,262 while per capita income is $37,696.
  • 42% of the population of Nashville is between the ages of 20 and 49, making the market perfect for rental property investors.
  • Median age in Nashville is 36.7 years vs. the Tennessee median age of 39.

 

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Job Market

The Nashville metro area has always been the growth center of Tennessee, according to Kiplinger, driven in part by Amazon adding up to 5,000 new jobs at its Nashville hub.  

As the economy in Nashville continues to recover, the BLS reports that construction, trade and transportation, financial activities, and professional and business services are some of the sectors showing the fastest signs of improvement.

Key Employment Stats:

  • The GDP of Nashville-Davidson-Murfreesboro-Franklin MSA is nearly $138.6 billion, according to the Federal Reserve Bank of St. Louis, and has grown by 71% over the past ten years.
  • Nashville Post reports the area GDP grew by more than 6% in 2018, more than double the growth rate of the entire U.S.
  • Employment growth in Nashville is 0.65% year-over-year while median household incomes grew by 3.1% over the same time period.
  • 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 6.1% as of October 2020, according to the BLS.
  • 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.
  • 90.5% of the Nashville residents have a high school degree or higher, while 38.5% 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 real estate market in Nashville continues to soar, with the strong demand for housing in Nashville boosting home values and sales transactions. According to News 2 WKRN, Nashville’s housing demand likely won’t stop anytime soon.

Nashville is ranked as the 4th best real estate market in the U.S. by WalletHub. The report analyzed 300 cities in the U.S. using the same criteria real estate investors look for, including rise in property values, housing-market attractiveness, and strength of the local economy.

Key Market Stats:

  • Zillow Home Value Index (ZHVI) for Nashville is $310,534 through November 2020.
  • Home values in Nashville have increased by 8.6% year-over-year and are projected to grow by another 10.3% in the next 12 months.
  • Over the past five years home values in Nashville have increased by 50%.
  • Median listing price for a home in Nashville is $360,000 based on the most recent report from Realtor.com (Nov. 2020).
  • Median listing price per square foot for a home in Nashville is $215.
  • Days on market is 24, according to Greater Nashville Realtors.
  • Median sales price of a home in Nashville is $350,000.
  • Of the 187 neighborhoods in Nashville, Edgehill is the most expensive with a median listing price of $830,000.
  • Most affordable neighborhood in Nashville to buy a home is Heron Walk where the median listing price is $224,800.


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Attractive Renters’ Market

Nashville is one of the top cities people are moving to, helping to keep the real estate market robust and the demand for single-family rental property in Nashville strong. As the Nashville Business Journal reports, Nashville is one of the top six cities seeing the highest amount of inbound growth as people migrate from more congested urban areas to affordable cities like Nashville.

Key Market Stats:

  • Average rent in Nashville is $1,800 per month for a 3-bedroom property, according to the most recent research from Zumper (December 2020).
  • Rents in Nashville have increased by 9% year-over-year.
  • Over the past three years average rents in Nashville have grown by 11.5%.
  • 69% of the rental units in Nashville rent for between $1,001 and $2,000 per month, according to RENTCafé.
  • Renter-occupied households in Nashville account for 46% of the total occupied housing units in the metropolitan area.
  • Neighborhoods in Nashville most affordable for renters include Airport Estates, Bayview, and Belair where rents average $1,067 per month.
  • Neighborhoods in Nashville with the highest rents include Historic Waverly, Woodbine, and Bellmont-Hillsboro where rents go as high as $3,500 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 month Freddie Mac releases its Home Price Index (FMHPI) report with up-to-date data on the change in home prices for all markets across the U.S. The most recent FMHPI report for the Nashville-Davidson-Murfreesboro-Franklin, TN MSA shows:

  • October 2015 HPI: 165.51
  • October 2020 HPI: 248.61
  • 5-year change in home prices: 50.2%
  • One-year change in home prices: 11.6%
  • Monthly change in home prices: 1.1%

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 was 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 as one of the best cities for young professionals in America, with high scores for diversity, nightlife, housing, and family living.
  • U.S. News also ranks Nashville as one of the best places to live in the U.S. and a great 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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