VOL. 37 | NO. 23 | Friday, June 7, 2013
My kingdom for a house! Low supply hurts sales
The lack of inventory in the residential real estate market is driving many of the would-be buyers mad, forcing some to consider renting as an option. There, they find another obstacle: A roughly 2 percent vacancy rate.
In the commercial rental market, those in search of space are learning the options are even less promising than those of the residential sale market. The market has been picked over, and most of what remains are the properties that everyone else has seen and rejected.
What now? How has this happened? Sure sales are up 26 percent this year after being up 28 percent last year, but, historically, the area has always held a large inventory. The city has not seen the relocation of a gigantic corporation into the area over the past two years, yet sales are soaring, and there would be even more sales with more inventory.
Tom Harwell, the director of leasing and marketing for Eakin properties, may have the answer.
“What we are seeing is the expansion of current tenants,” he explains. “Tenants that leased 6,000 to 7,000 square feet several years ago are experiencing growth and success, and their need for space is growing. Some of those now need 12,000 to 15,000.”
That success and growth of local companies and their recruitment of employees from outside the Nashville area are driving residential sales and leasing.
Tom Harwell, the director of leasing and marketing for Eakin Properties
One of the factors in the lower inventory could be that interest rates remained low at a time when house prices were in decline, and many of the residents took advantage of the opportunity to refinance at the lower rates and have chosen to remain in their current residences for a fraction of what they were paying at the time of the purchase.
In the past, as prices increased, owners sold and moved up or down. Not this time.
As the recession ended, one impediment to the successful culmination of a transaction was the appraisal. With the new appraisal management companies (AMCs), coupled with the scrutiny that the appraisers met, numerous sales were thwarted by low appraisals.
In many instances, houses were appraising for less than they had contracted. In such a case, there are three options:
- The seller can take the lesser amount.
- The buyer can pay the higher price anyway.
- The contract can be terminated.
In most situations with a low appraisal, the buyers walk and feel great disdain for their Realtors for nearly allowing them to pay too much for the property. The sellers seethe with antipathy towards the appraiser who robbed them of the sale, and, consequently, most contracts were terminated.
This is not currently the norm, as appraisers have adjusted their opinions based on the upward movement of the market. And the other former culprit – the lender – is no longer foiling deals, perhaps a result of loan officers and Realtors having become more accustomed to the new system.
Now, it’s more the case of buyers shooting themselves in the foot. Or, sellers are still making lowball offers on properties that have multiple offers.
Sale of the Week
This week’s featured sale is 109 Clydelan Court, a road less traveled in the Belle Meade Highlands near Percy Warner Park. It is honored this week simply due to its coolness.
As the city continues to attract homeowners from across the country, some homebuilder should undertake construction of contemporary homes like this.
Ten years ago, when there were no loft condominiums, demand forced some visionaries into the contemporary arena.
True, the demand in Nashville has been for traditional housing, and it is surprising that very few contemporary homes were built, even as custom houses.
The house at 109 Clydelan Court was listed by Sheila Reuther, who for years has been the listing agent for most things cool. Yet, even in her Realtor remarks, she was hesitant to proclaim the hipness of the house, giving buyers the options to “move in, renovate or start over. The possibilities are endless!” A slight hedge, and it worked. She sold the property four days after listing it.
The home has “four or five bedrooms,” Sheila says, not a reference to a failing memory, but an explanation of the versatility of the floor plan. It also has 5,025 square feet with a master bedroom on the first and second floors. The home features an opportunity to store wine safely and has “great outdoor entertaining areas.”
Chip Wilkison, whose name appears to be lacking a consonant, but is spelled the same way as the Nashville-born movie, television and stage actor Jay Wilkison, brought the buyer. Chip is a Realtor with BrokerSouth, the same firm as Ms. Reuther.
Richard Courtney is a partner with Christianson, Patterson, Courtney, and Associates and can be reached @richardcourtney.com.