Nashville homebuyers gained an edge this fall as prices rose at the slowest pace in four years.

The inventory of homes for sale — which has been tight for years — grew in the third quarter, offering shoppers more choices.

Slowing price increases offset rising interest rates, but fewer homes were sold than at this time last year.

"Nashville is still outperforming the nation," said Daren Blomquist, senior vice president at real estate industry analyst Attom Data Solutions. "I think we're going to see the price appreciation continue to slow down and, at the very least, flatten out into the low single-digit appreciation. I think it's a very healthy pattern."

Sale prices trending down

Home prices in the Greater Nashville area are still growing faster than the national average.

They jumped 6.4 percent compared with 4.8 percent nationally in the third quarter, according to deed sales including both listed and off-market purchases analyzed by Attom Data Solutions.

Music City house prices grew at nearly half the rate they did in the third quarter of 2017, when they jumped 11.9 percent.

The median home price is now $250,000.

Fewer homes selling

Year over year, 14.7 percent fewer listed homes sold from July through September, according to Re/Max.

The winter months will likely see a similar downtrend, said Jeff Checko, a Re/Max Advantage Realty agent and housing developer.

"I think buyers have a little more clout than they did six months ago," Checko said. "In the winter months, you do scale back. I just had a home I was willing to take about a $10,000 price deduction to make it work for a buyer. If it had been June, I probably would have said no."

Location, location, location

When Erin and Sean Oprea bought a home near downtown in late October, their main concern was location.

Their children recently moved out of their house in Rutherford County, and they wanted to be downtown where they could walk around more easily.

"It's expensive in Nashville now," said Erin Oprea, who is the personal trainer for Carrie Underwood, Maren Morris, Martina McBride, Kelsea Ballerini, Lee Ann Womack, Lauren Alaina and other celebrities. "We downsized, but we moved strictly for location."

But living downtown comes with higher costs. They paid twice the median housing price for a newly built three-level town house with a view of the downtown skyline.

"We love to walk to the farmers market, and there's so much activity downtown," Oprea said. "We're not suburb people."

Interest rates rising

The decelerating prices come as mortgage rates rise.

The Federal Reserve recently raised interest rates above 5 percent for the first time in seven years, and they are expected to continue to go up gradually through 2019.

Increased rates translate to higher monthly payments, which is what first-time homebuyers often use to gauge affordability.

On Zillow.com, home value appreciation declined from 14 percent last year to 9.6 percent in September. Meanwhile, housing inventory increased 25 percent in recent months.

"I do think interest rates could be contributing to this," said Zillow economist Jeff Tucker. "Your monthly payment is going to be significantly more. This could dissuade buyers who are bumping up against high price points."

Checko owns a construction company and recently decided to build smaller, more affordable units than originally planned in the urban core because of the rising interest rates.

"We decided to target a price point a little lower than we had been because we felt it would continue to perform as interest rates go up," he said. "Millennials and middle-class buyers buy based on payments. They say: 'I'm going to find out what $2,000 a month will get me.' "

Reach Sandy Mazza at smazza@tennessean.com or 615-726-5962 and on Twitter @SandyMazza.

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