2008 Recession: The Nashville Housing Market

Ever wonder what the Housing Market performed like in the Nashville area during the 2008 Recession? America is gripping the handle tight right now as we watch gas prices rise, along with the Consumer Price Index. Mortgage rates climbed to more than 3% again, according to Freddie Mac.

Everybody, deep breath. Let’s “Woosah.”

Let’s take a deep breath, folks. We need to remember that the Media loves to paint the picture of Dooms Day as often as they can. Apparently, these Corporate Execs aren’t earning enough money to actually PURCHASE the islands that they’re visiting every month. That isn’t good enough for them, they need the ratings.

I’m kidding, sort of.

Let’s take a look at the chart above. This post will be short and sweet, but also a very important reflection of what the residential housing market in Nashville, Franklin, and Middle Tennessee were like two years prior and five years after the last Recession in 2008.

Takeaway #1 | Pre-2008 Was Not Impressive

Here in 2021, Franklin has been the hottest market in our region by far… The numbers aren’t even close. In May 2021, roughly 30% of the homes that sold in Franklin closed for at least $50,000 over asking price. There were homes that closed more than $200,000 over! Yet, 2006-2007, it underwhelmingly deflated. Middle Tennessee as a whole only appreciated $3,000 in Median Home Price. Compare that to today, where each County is appreciating around 20% a year (thanks to school quality and population influx).

We also recognize that Average Days on Market (DOM) increased across the board. That identifies a drop in buyer demand. Now, take a look at the total number of homes sold. This decline along with the increase in DOM means that despite the inventory of homes declining, we still experienced a drop in demand.

That’s the tell-tale sign of a recessing market.

Less Sellers, less Buyers. A less lucrative market.

Takeaway #2 | 2009 Was The Haymaker

The average 30 year Fixed Mortgage Rate in 2009 was about 5.03%, remember that. Median Home Prices took a shot on the chin in ’09. But it didn’t knock us out, thank goodness. With that -$8,150 decrease in value, a large shift in DOM (Buyer Demand) could have altered the recovery drastically. Imagine yourself selling a home during that time (some of you did).

See above: Notice the drop in the Employment Rate just before 2010? You can imagine the lack of confidence that existed in the housing market.

“How could I have prepared for that as a Seller?”

That’s the question that differentiates us. Great leaders ask great questions. If you’re afraid of the 2021 (or 2022) housing market and you know you’ll need to sell soon, ask about Inventory (total homes sold) and DOM. Compare the two. There was a stark change in inventory in 2008 that could have very well been a key identifier of what was to come in 2009.

  • Can you send me the numbers on the Average Days on Market by month this year, and also a short three year history by Quarter? I want to compare this market to years prior.
  • How does the Inventory this year compare to previous years?
  • How many homes sold this month last year, and the year before?

Internally, you may feel like you’re asking a lot… But if you’re approaching a Recession Market, and it could mean the difference between selling now and avoiding a $10,000 loss, don’t you think the questions and data are worth it? It’s time to hold Realtors to a higher standard. I’d love for someone to ask me that question!

Work with a professional that will maximize your dollars.

If they act like they don’t have time, get rid of them.

Very Important…

If you’re selling a home during a Recession Market, I want you to remember this. There are still people who sell their properties for full asking price or more during terrible markets.

Check out this link to homes sold in 2009 between $300-310k.

There’s plenty of data in that link. I sorted the homes by Sold Price so that you could also view what they were listed for. Notice that the homes that sold for the most had been updated, the biggest losses were sold “As-Is.” That’s the key. In order to win in a bad market, you need to make the decision of buying your home as much of a no-brainer as possible. And you need great marketing! If you don’t have the capital to do that, simply wait. You can also meet with a local bank (such as Tri-Star Bank in Middle Tennessee) and either do a Home Equity Loan or a Cash-Out Refinance on the home so that you can utilize that money for improvements.

Last point – Contractors, handymen, and tradesmen will also be feeling the hit from the Recessing market at that time. Negotiate with them! It’s impossible in the 2021 market because of the amount of business that they have. But when the tide turns, the negotiating leverage will be in your favor. Work them down on their numbers.

No matter how you achieve it – you want to be the best home in your price range when you hit the market.

Great homes always sell.

Takeaway #3 | The Moment Things Changed

The pendulum swung just two years after the bust of 2009. Total Homes Sold began rising again, which put a great emphasis on negotiating during a ”changing” market. Think about that… You’re in 2011 and 2012, after just experiencing a big bust. What were your expectations as a Seller? Did your Realtor inform you of what the market was doing? How well did they negotiate? Did you take a rotten deal on your house because you didn’t realize that markets were turning?

Market awareness is exceptionally critical. Someone has to be aware in that situation… If it isn’t your Realtor, it needs to be you, otherwise you can expect to lose money.

Back to the recovery – there aren’t a ton of cities in the United States that can say that they recovered so quickly! There were areas that were much harder hit. Check out this 2015 article in Baltimore, for example. By 2013, Middle Tennessee as a region was off to the races! We haven’t looked back since.

Mortgage Rates Changed the Landscape

Remember, the average 30 Year Fixed Mortgage Rate in 2009 was 5.03%… Check out what happened monthly in 2011 with the national average for the 30 Year Fixed Mortgage Rate. There were other variables that positively impacted the Economy during those years, but mortgage rates dropping were the defibrillators that shocked the heart of the Housing Market and brought it back to life. When home buying became more affordable, Buyers flooded the market, swinging Buyer Demand and Median Home Prices thus making the sale of a home lucrative again.

As discussed in my previous post, ”Are We Heading Into a Recession?” – Liquidity and the cyclical flow of money in the economy is paramount to preventing, or keeping us out of a Recession. Check out this article by FederalReserveHistory.org for a deeper dive into the financial policies that were made that catalyzed our recovery.

Conclusion

The Nashville area has experienced a substantial population influx since roughly 2006/2007. This influx has created a constant demand for housing allowing our Median Home Values to skyrocket upward. I communicate with out of state clients regularly, and Nashville seems to be an area that people from all over the country relocate to for better opportunity and values. Do I expect the influx to change?

Short answer: Nope.

If you met with local Planning & Zoning officials, and attended the Board Meetings where new developments, warehouses, large retail, and other commercial giants are requesting approvals for big projects in the Region, you’d doubt any sort of slow-down in the near future. Jobs are being created, the Housing Market is currently lucrative, Median Household Income is rising, Buyer Demand is increasing (still, somehow), and local small businesses are thriving. This area will experience a Recession differently than other parts of our nation for those reasons.

It’s a great time to be in the Nashville area!


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