NASHVILLE, Tenn. (WKRN) – New Yorkers and Californians seem to love the Music City housing market, and they’re on the move with lots of money and a higher tolerance for debt.
“These out-of-towners are coming in with really big budgets,” Daryl Fairweather, Chief Economist at Redfin said.
In addition, Jeff Checko, a realtor and broker with The Ashton Group of RE/MAX Advantage, says people moving from expensive cities are used to taking on bigger mortgages, even if they don’t have the money.
In fact, these out-of-town buyers have housing budgets nearly 50 percent higher than locals, the highest gap of any city, according to a new Redfin report.
Redfin says the average housing budget for out-of-towners moving to Nashville in 2020 was $719,500, 48 percent higher than the $485,500 average budget for local buyers.
“People can work from home and they’re looking to move to somewhere where they can afford a place and keep their high salary working remotely, and Nashville is really attractive,” Fairweather said.
For those already living in Nashville, this news is both good and bad.
We’ll start with the good.
“If you are looking to sell you can cash in, but you can actually refinance your home mortgage rates are really low and take out some equity. That way, if you’re looking to take advantage that your home has risen in value,” Fairweather said.
Moving now to the bad. First, this can cause bidding wars. Someone who is used to San Francisco pricing or New York City prices may be willing to outbid and spend thousands or even tens of thousands over the asking price.
In addition, more people moving to the city means more demand and less inventory, driving home prices up even more.
However, there is good news for first-time buyers who may currently be priced out of the market from the out-of-towners and high home prices.
The Biden administration is looking to give a big boost to homebuyers with a $15,000 tax credit, which could be used as a down payment.
“It sounds great,” Checko said. “The fear is that we’re allowing people entrance into homeownership that maybe they can’t afford. We don’t want to go back to 2008, 2009 where there were a lot of people in mortgages where they couldn’t make the rubber meet the road.”
Jeff Checko says the FHA could also reduce its monthly insurance premiums under the new administration.
“Another thing Biden is allegedly going to be pushing, and I really like this, is more multi-family allowances when it comes to zoning,” Checko said. “Apparently the zoning codes are starting to become restrictive in areas that want to maintain their communities in a certain fashion and as our population grows and workforce grows and people need places to live.”
All of this, if it happens, would be good news and would help ease the burden on first-time home-buyers in Nashville. More multi-family homes would help our lack of inventory, eventually lowering prices.
In addition, the tax credit would help homeowners afford a home and compete against the out-of-town buyers coming in with a load of wealth.