NASHVILLE, Tenn. (WKRN) — For many, the days of finding an affordable home are few and far between, especially when that home is brand new.
New data shows most Americans cannot afford a new construction home, and that same report points out people in Nashville are struggling to buy a home – period.
Typically, a new construction home costs about 20% more than an existing home, but in Nashville, where homes are in high demand, there’s only a $1,300 difference between the median price of existing homes and brand new builds.
As home prices hover high, online homeownership platform, Knock, has shared data the shows how much relief new construction is providing buyers, especially first time homebuyers, as the maneuver the market.
Sean Black, the co-founder, CEO of Knock, said, “In general, I think home prices are appreciating at a much higher rate than the medium household income, So, we’re racing to get more inventory on the market, but unfortunately, due to lack of supply, the prices are growing faster than the inventory.”
To qualify for a $391,000 mortgage on a home, which was the median price of a new home sold in Nashville in August, a buyer putting down a 6% payment would need an annual household income of about $80,000.
That means more than half of Nashvillians would be priced out of the market based on the areas median household income, which is $70,000.
And with that $1,300 difference between new and existing homes in Nashville, more than half of the city’s residents wouldn’t be able to afford any home at all.
Amanda Peterson, a realtor for Ashton Group of RE/MAX Advantage, said, “The market is really busy in Nashville, and we’re getting so much uptick in people that the market has changed for us, which is different from rest of the U.S., because not everyone has this job market and influx of people. So, that’s why our gap is so much smaller.”
In fact, Nashville stands out as the market with the smallest gap between new and existing home prices.
Peterson added, “You may be willing to pay more for a 10-year-old home than you would have 5 years ago. But if you want to own a home, be in the market where the interest rates are lower where you have a great job market a lot of opportunity, so people are willing to pay a bit more for an older home than wait an extended amount of time for new build.”
Plus, Nashville’s new home inventory activity is higher than others, sitting around 16%.
“When you see that small premium for new construction home, it really speaks to the amount of available land,” said Alexandria Quintana, a research analyst at Knock. “So, for people in Nashville it’s a great thing for them.”
Ultimately, what the data shows is due to the competition and lack of inventory in the market, people are willing to pay for a home above the price that it’s worth.