Housing shortage in Tennessee

Why We Could Have a Housing Shortage in TN for 2023

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Housing shortage in Tennessee

Could we see a housing shortage in 2023? It’s no secret we’ve had a crazy few years in real estate market. COVID shut downs and fear of an economic collapsed triggered our government to take action and force low rates. Mortgage rates dropped to historic low levels and homebuyers took advantage of the rates to buy new homes. Homeowners also used the low rates to refinance or do cash out refinances to get a little extra money from the equity caused by the rising home values. That brings us to today and the potential for home inventory shortages.

“Half of all mortgaged homes have first-lien interest rates at or below 3.5%, a full 3 percentage points below today’s market rate, while two-thirds are at 4% or lower”

The Mortgage Rates are a Limiting Factor

If you have a mortgage rate 3 percentage points lower than the current rates you have a situation where you aren’t going to be terribly motivated to sell your home and deal with those new rates. On a $300k mortgage that’s about $550 more per month at the higher rate. Everyone who bought a new home or refinanced over the last couple years will just sit tight as long as they can manage their current home payments. Outside factors like factors like job changes or family needs could potentially encourage moves.

Some people may choose to rent out the home with the low rate if they need to move rather than sell and lose the rate and the equity they could build. In either case the mortgage rates will cause a log jam in the transfer of homes.

Higher Home Values

Let’s not leave out the home values though, they are higher than ever making it very hard for entry level home buyers to purchase their first home. It also makes lateral or upsizing moves difficult as someone may have bought several years ago and have the double whammy of increased home prices and higher interest rates.

Need for New Construction

New construction homes will by necessity be the primary option for home buyers but due to the slowdown and high interest rates builders have cut back on a lot of their single family projects. They did not want to continue to push new homes when there was so much risk and uncertainty caused by the interest rates which will contribute to the housing shortage. The supply is going to be down for single family homes and many large scale builders have opted for townhome style developments.

If you are thinking of selling keep watching the market, this spring could be interesting! It will very likely be a great time to sell the home but keep in mind inventory may be difficult to find if you are purchasing a home as well.

Give me a call if you need real estate help in Middle Tennessee.
Also we have new construction projects going in Columbia and Summertown so give me a call or text for more info.

Dave Townsend, TriStar Elite Realty
C. 931-808-6808
O. 931-548-2300

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