NASHVILLE, Tenn. (WKRN) — Nashville home buyers and sellers have at least one thing in common – they are both dealing with the emotions of facing a volatile market.

“We are in a unique position right now because we, on one side, have buyers who emotionally have not readjusted to where interest rates have taken their buying power,” said Brad Copeland, realtor and recently appointed President of Greater Nashville REALTORS.

While mortgage rates traditionally move up and down with the state of the economy, they are also influenced by the Federal Reserve.

The Federal Reserve has raised its rates six times so far this year with 3% in just the last six months. The rates were first increased in January from 0 to 0.25%. Now, the rate is 4%.

“We’ve got buyers sitting on the sidelines right now trying to emotionally adjust to the fact that their buying power just wasn’t what it was six months ago,” he said.

For example, someone who was shopping in a $500k price point will now have to shop around a $300k price point to keep that same mortgage, Copeland explained.

“That’s a completely different housing stock; perhaps in a completely different location or school zone that they were looking in,” he said.

At the same time, Copeland said sellers are also dealing with the emotional toll of a slowing market because houses are not selling as fast as they were earlier this year.

The time a house averages being on this market has grown from 32 days in September to 39 days in October, according to data from Greater Nashville REALTORS.

Home prices are another factor in how the market moves, Copeland said.

“On the other extreme, we have sellers who were pricing – I’ll call it ‘speculatively.’”

For instance, a seller could put a house on the market for $400k, but if they had waited two weeks then it would sell for $440k because the demand was so high, Copeland said.

“That’s an unsustainable market. That’s really where we’ve been over this last year,” he said. “Sellers got used to that market… and were anticipating the continual rise in those prices.”

While the rising interest rates have contributed to the cooling of housing markets across the country, Nashville has further become a buyer’s market, according to Knock, a home loan financing program.

In September, Nashville was ranked in the top 16 buyer’s markets. According to Knock’s latest report Buyer/Seller Index, the city comes in at No. 9 on the list.

Several factors are “baked into the index” that make up the report, like availability and affordability, said Sean Black, CEO of Knock.

“With all the runup that Nashville has seen in the last couple of years, it makes it one of the most expensive housing markets in the U.S.,” Black said. The lack of inventory and high demand drove the seller’s market.

Black said the market reached a “crest” in June when prices were up dramatically.

“At the time it may have been appropriate leading up to then, but that market just completely changed overnight. And those homes didn’t price appropriately,” he added sellers didn’t pivot quick enough to adjust prices, and the result has been a softening of the market.

For the month of October, the Nashville-Davidson-Murfreesboro-Franklin market had an inventory of 5,791 properties, which is about 1.6-month supply, and a median of 28 days on the market, according to the report.

The Index also predicts Nashville still being a buyer’s market in October of 2023, especially with the possibility of the federal interest rate going up again.

“In this case, it’s the continued unaffordability of Nashville relative to other markets that are on the other side of the spectrum-the cheaper side,” he continued. “North Carolina, South Carolina, keep coming up as examples of top seller’s markets because they’re in the 200 and low 300’s in terms of average price.”

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Black added another reason Nashville has been added to the buyer’s market list is because the leverage is with the buyer.

“It’s somewhat on a relative basis because it’s also ranking it amongst other markets in the speed of which they’re going up and down and leaning towards a buyer’s market.” He said an increase of inventory and longer times on the market coupled with a lack of buyers to absorb those are also factors.

The Knock Buyer/Seller Index uses information on more than 150 million properties in the country’s top 100 markets of total home sales starting from 2017 and refreshes each month.

While Knock’s report indicates a buyer’s market, Copeland believes the market still favors sellers.

“We ideally want to get to a point where we are neutral, and we’re around a three-month inventory month,” said Copeland, adding according to the metrics they use, that inventory needs to be at about four to six-month range before it becomes a buyers’ market.

Copeland hopes Nashville will see a more neutral market in the coming year, adding more inventory, lower interest rates, and appropriate home prices needs to be present.

“I would love for us to be getting closer to a neutral market because I think that’s easier and less stressful for everyone involved,” he advised both sellers and buyers to work with a realtor who has the expertise of following along the roller coaster market.

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For sellers, Copeland’s best advice for them would be to price conservatively and to increase the home’s “curb” appeal like staging it, painting it, and putting a sign in the yard.

For buyers, Copeland’s best advice for them would be to ask for closing costs, to ask for a rate buy down, and “don’t be afraid to ask for things that the previous market were just unheard of.”