May 12, 2022 - Real Estate

Surging mortgage rates make home buying more expensive in Nashville

Illustration of a house's roof being taken off by a trend line soaring upward through the home
Illustration: Annelise Capossela/Axios

Rising mortgage rates are adding to the perfect storm putting pressure on the Nashville area's housing market.

Why it matters: Low mortgage rates made buying in a sellers' market more affordable in the pandemic.

  • In March 2022, median home sale values in Nashville were up 23.9% year over year, and now borrowing money is more expensive, too.
  • Already-fatigued buyers could be priced out of homes closer to the urban core.

What they're saying: "We've got a storm," Brian Copeland, founder of Doorbell Real Estate and immediate past president of Greater Nashville Realtors, tells Axios.

  • Interest rates are combining with lightning-fast sales and Nashville's broad appeal to "create a supercell," he says.

Zoom out: Copeland says rising monthly mortgage payments continue to drive interest in surrounding counties where prices are more affordable.

  • Dickson, Robertson and Sumner counties are becoming more attractive to prospective buyers, Copeland says.
  • Copeland predicts interest will intensify just over the state line in Franklin, Kentucky.
  • "If someone wants to be in this market with these higher interest rates, they're going to have to look at commute time."
Data: Freddie Mac, Redfin; Chart: Simran Parwani/Axios
Data: Freddie Mac, Redfin; Chart: Simran Parwani/Axios

State of play: A year ago, mortgage rates were at 2.97%. In late April 2022, mortgage rates were at 5.11%.

By the numbers: If you were to take out a $300,000 30-year mortgage loan in April 2021, your monthly principal and interest would be around $1,260, according to numbers shared by Freddie Mac.

  • Your monthly payment on the same loan in April 2022 would be $1,631.
  • That's $371 more per month, $4,452 a year and $133,560 more over the lifetime of your loan.

What's next: Mortgage rates are expected to rise throughout the year, averaging 4.6% for 2022 and 5% for 2023, according to Freddie Mac's trend forecast.

  • So far in 2022, home prices haven't jumped drastically month to month, like they did in 2021.
  • But we're still in a critical supply crunch, so inventory would have to catch up to the remaining demand for prices to actually cool.
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