By Amy Griffith, agriffith@nashvillecitypaper.com
October 17, 2006

In the wake of a recent Moody’s Economy.com study documenting the downturn of housing prices in 130 metro areas, economists say Nashville’s housing market should continue its current trajectory of slow, steady appreciation, insulated from national fluctuation by its diverse economic base.

Moody’s West Chester, Pa.-based economist Charmaine Buskas said Nashville didn’t experience the same spike in house prices that affected the rest of the country, and consequently will not experience a plummet.

“[Nashville’s] housing market hasn’t seen the type of activity that other cities have seen,” Buskas said during a telephone interview. “That’s not to say it’s not been a positive driver for the economy. It just hasn’t seen the same, dramatic influx.”

The metro areas identified by Moody’s account for nearly one-half the value of the nation’s single-family housing stock. A price downturn is already in progress in these areas, and is expected to affect national housing prices within a year.

Price crashes are forecasted in 20 metro areas, particularly those along the southwest coast of Florida and in the Southwest.

The price drops are the result of dramatic upswings in 2000 and 2001. Low interest rates combined with an uncertain stock market to trigger a massive surge in real estate investment. Moody’s also attributes the housing boom to collective national nesting instincts in the aftermath of Sept. 11, 2001.

But Nashville prices have moved more slowly than national prices. Locally, prices began to move upward in 2002 — at least a year after national prices skyrocketed — and continued to grow at a modest 3-5 percent each year, according to figures from the Greater Nashville Association of Realtors.

GNAR President Christie Wilson described Nashville price appreciation as, “slow and steady, and I say that as a total positive. When you start seeing appreciation rates of 25 percent, you have nowhere to go but down. But a 3-5 percent increase is something you can sustain.”

“While Nashville has not had the same degree of appreciation that either the nation or other similarly sized metros had, as the national market is turning down now, house pricing in Nashville still seems on an up trend,” Buskas said.

Housing price growth has occurred locally – the median price for a home in Davidson and its surrounding counties was $178,900 last month, up from $162,610 in September 2005, Wilson said – but the city’s housing price median is typically well below the national median.

Buskas attributes local housing price growth to expansion of the local economy, as opposed to surges in real estate investment that drove prices nationally. Furthermore, Nashville’s economic growth stems from the health care industry and business headquarter relocations to the area, neither of which is likely to cause fluctuation in the private housing market.

Business relocations tend to put pressure on commercial real estate prices, including construction costs and the industrial and office space sectors. Individual home prices are insulated, as many corporations moving to Nashville hire from the local employment pool.

Wilson said Nashville also has not seen the amount of real estate speculation experienced by other cities. Real estate “flippers” — short-term investors who purchase a home only to resell for a profit in several months — are outnumbered by renovators.

“The renovators have done nothing but make neighborhoods that were once considered blighted are now hip, cool, desirable places to be,” Wilson said.

By Richard Lawson
09-28-2006 6:11 PM —

Bristol Development is hoping there is plenty of velocity in sales of condominiums in The Gulch, so much so that the developer has named its latest would-be project Velocity.

Talk has circulated since this summer that Bristol Development had such a project in the works, even apparently creating a web site for the eventual sales effort. Bristol principal Ashlyn Hines confirmed this afternoon that the project is in the advanced design stages.

Hines said the six-story project would have 200-220 units, ranging in size from 525-550 square feet to 1,000-1,100 square feet. Prices would come in under 300,000 and start in the 160s, she said. That price range is below Bristol’s 424-unit Icon, which were in the range of $175,000 to $850,000.

At the same time, she said Bristol would build a separate project with about 120 rental apartments above ground level retail. That building doesn’t have a name yet. Both projects would go somewhere along 11th Avenue South in the old rail yard, part of which is currently used for parking. Hines said, too, that Pine Street, which dead-ends into 11th, would be extended.

Hines promises that Velocity’s design won’t be like anything else in Nashville. “We have traveled all over the country outside the South and looked at some really cutting-edge designs that weren’t in Nashville,” she said. Hines said the interior finishes also would be unlike anything else found in Nashville. She didn’t want to disclose just yet the types of urban projects she and her team looked at elsewhere or the types of finishes planned for the units.

The sales office is scheduled to open next March. Hines said the plan is to start construction in June and open 18 months later. Unlike with Icon, or many other big urban condo projects that Bristol and others have under construction, the developer won’t be taking reservations, Hines said. It will be first come, first served as Bristol goes immediately to sales contracts on units.

Icon’s first 217 units sold out in 48 hours. Bristol put 207 units originally planned for rental apartments up for sale, and those sold out quickly, too. In real estate circles, the sales pace has drawn some skeptics who questioned whether sales were driven more by investors speculating or buyers who will actually live there. Bristol officials have said in the past that there probably are some speculators, but determining the exact number is difficult.

Still, the units are sold. The planned apartment project, however, won’t be converted to for-sale condos if Velocity’s sales are as brisk. “We are absolutely going to keep those as long-term rental,” Hines said, adding that rental is a stated goal of Marketstreet Equities, Bristol’s partner and the master developer for The Gulch.

Meanwhile, Bristol is looking at another site in the West End area – the corner of 31st Avenue and Long Boulevard. That area is hot now with developers building hundreds of condos and town homes. Hines said that project would have 150-200 units. “We’re still on the fence on whether it’s something we want to do,” Hines said.