The City Paper Online
By Richard Courtney, Columnist
April 14, 2006

For those living in Nashville and reading news from a variety of sources, there seems to be conflicting data as far as the housing market is concerned. One day a headline reads that home sales are continuing to rise, while another suggests that the market has gone south.

Ironically, both headlines ring true. Locally, sales are on the upswing in the greater Nashville market, which includes Rutherford County, Williamson County, and parts of Sumner, Robertson and Cheatham counties, and all of Davidson. This market continues to break sales records month after month year after year, much to the chagrin of the followers of one Chicken Little and the schattenfreudists, those that take delight in the misfortune of others.

Some may find it difficult to understand why there would be those in the community who want the housing market to cool. However, they exist. Some are those on fixed incomes fearing that increasing sales cause increasing values therefore causing higher taxes. A walk through the tax assessor’s office validates those concerns.

Strangely, however, the bulk of those waiting for what they perceive as that joyful day that the real estate bubble bursts are annoyed that others that have invested in housing have enjoyed a strong return on their investment.

There are many examples of first-time homebuyers having invested as little as $3,000 to acquire a home, paying a nominal monthly payment and realizing a gain of $100,000 when they sold after only three years. Assuming they would have had to pay rent and understanding that the interest on the mortgage is deductible, the initial $3,000 investment, therefore, was the only out of pocket cash outlay and the return was $100,000. In short, they were paid $93 per day to breathe the Nashville air.

Unfortunately there are those that, by their own volition, have chosen not to invest in the market, and they are forced to pay the price, literally. They long for a housing slump. What they do not realize is that when the housing market suffers, the entire economy suffers.

In today’s business world, there are millions of employees who have not experienced a real recession. Oh sure, there have been a couple of hiccups, but nothing like 1978-1982, or 1989-1992. Sure home prices were affected, but to the millions and millions of people who lost their jobs, to the thousands and thousands of companies including hundreds of savings and loans that folded, housing prices were not in the forefront of their worries.

However, even in the bleakest of economic times, Nashville single-family home prices held their values. In some of the lean years, they did not appreciate as rapidly as they have in recent years, but they proved their strength as investments. OK, so some condos had some issues, but it took a Tax Reform Act to lower their values, and they have come back strong.

So, those waiting on the bubble should bite the bullet. As Nick Retsinas of Harvard noted last month, the gap between the haves and the have-nots is widening. Some will awaken tomorrow having made a hundred dollars while they slept. Conversely, there are those for whom the opportunity to own that same home slipped a hundred dollars further away while they slept.