What does Amazon's announcement mean for Nashville's housing market?

Mike Reicher | The Tennessean

Show Caption Hide Caption What you need to know about Amazon choosing Nashville to bring 5,000 jobs Amazon chooses Nashville to bring 5,000 jobs to downtown

In Seattle, Amazon’s 45,000 workers contributed to skyrocketing housing costs — an oft-criticized part of the “Amazon effect.”

Now 5,000 of the company’s jobs — with an average annual salary of $150,000 — are coming to Nashville.

The addition of thousands more white-collar employees to the city, both from Amazon and other companies, could push up housing prices, experts say. Some neighborhoods and types of homes could be in more demand — and potentially command a higher price — depending on how Amazon recruits its employees, and the types of jobs they fill. The effects, though, will be diffused over years, which is welcome news for many struggling to afford housing.

“Those kind of higher-wage jobs will put upward pressure on home prices,” said Daren Blomquist, senior vice president at Attom Data Solutions, a national property information company. “There are already upward pressures because it’s a booming economy, even without Amazon.”

Amazon said its new office will provide technology and management for its retail operations division, which handles customer service, transportation, the supply chain and fulfillment of online orders. The company hasn’t detailed, however, what types of jobs will be needed — how many software engineers, for instance, or managers will make up the 5,000 positions.

Don't stereotype Amazon workforce and their housing needs

That breakdown could give some clues about what types of housing new employees would want, said Aaron Terrazas, a senior economist at Zillow. If it’s skewed toward programmers and developers who are typically younger workers at tech companies — then urban lofts downtown might be in more demand. Middle managers with young families could be looking for good schools and larger homes — somewhere like Williamson County.

But making broad generalizations about the Amazon workforce is misguided, Terrazas said.

“There’s a stereotype that they’re all 22-year-olds who want to live an urban lifestyle,” he added. “But Amazon’s workforce is diverse.”

A household needs to make $74,000 a year to afford the median-priced home of $270,000 in Davidson County, according to Attom Data Solutions. In Williamson County, a household would have to make $124,000 a year to afford the median home.

While Amazon is the most high-profile of recent announcements, the accounting firm EY and Global money management firm AllianceBernstein also recently committed to bringing a combined 1,600 jobs to downtown.

Many employees will likely look to live in the urban core, within a short commute to Downtown. A third of the Amazon employees are expected to walk or bike to work, Nashville Mayor David Briley said during Tuesday’s press conference.

Generally, downtown workers prefer to live within a 20-minute commute, said Erin Krueger, a Nashville-based real estate broker.

“Quality of life is a big deal in Nashville,” said Krueger, who expects the radius within a 30-minute drive to downtown will get the biggest price boost.

How much home-grown talent will Amazon hire?

Whether these white collar employees are recruited locally or from outside the region could influence their housing choices. People moving to Nashville from high-cost coastal cities could have a larger impact.

“If there’s a heavier mix of people from outside of the market — maybe cashing out from a place like Seattle — those people are already coming in with more buying power,” said Blomquist from Attom. “That would tend to put more upward pressure on home prices, than if there were more home-grown talent.”

Based on Amazon’s description so far, the positions will likely be in marketing, sales, accounting, IT, management and other functions that serve internal roles at the corporation, said Nancy Eisenbrandt, the chief talent development officer at the Nashville Area Chamber of Commerce.

“I anticipate it would be a pretty broad spectrum of jobs that you would see at any divisional headquarters,” she said, comparing it to one of the major health care companies with offices in Nashville. “We have a very strong capacity for that.”

Nashville’s economy already has a deep and growing pool of workers in these types of jobs. The number of workers in professional and business services grew by 40 percent from 2012 to 2017 — the fastest among all sectors in Davidson County, according to the Bureau of Labor Statistics.

Amazon said it would recruit a mix of local workers and those outside the region, but it hasn’t elaborated.

People moving from the coasts, especially, have driven up housing costs in Davidson County during recent years. The median home price has climbed from $152,000 in the third quarter of 2012 to $265,000 in the third quarter of this year.

But Nashville, along with many markets across the U.S., is now experiencing a slowdown. The inventory of homes for sale — which has been tight for years — grew in the third quarter, offering shoppers more choices. Apartments downtown have been overbuilt, leading vacancy rates to creep up.

More: Want to work for Amazon in Nashville? Here's what you need to know

Speculators will be banking on some neighborhoods

Amazon’s hiring could provide a boost to the slowed market. The first wave might be investors looking for single-family homes or multifamily apartment buildings that could serve as temporary corporate housing, experts said. They would be looking in the urban core, especially in lower-cost areas that haven’t gentrified much, said Blomquist from Attom Data Solutions.

“You’re going to have speculators and investors coming in and banking on it,” Blomquist said.

The federal tax overhaul signed in late 2017 provided some incentives for people buying in “distressed” markets. In order to qualify for the tax break, they have to hold onto property for 10 years.

“There will be a continuing push in West Nashville and North Nashville — places that haven’t fully redeveloped,” said Krueger, the Nashville agent.

Next, the rental market would see a boost from new employees moving here, who might be looking to buy. Then homes and condominiums would see an injection of demand.

Amazon in Nashville: What people are saying about company bringing 5,000 corporate jobs

“Because Nashville is relatively affordable,” Terrazas from Zillow said, “I think most people would buy relatively quickly.”

All of this would play out over the next several years, as these companies staff up. Amazon, for its part, committed to hiring the 5,000 workers during a seven-year span.

After Nissan announced it was moving about 1,300 employees to Franklin in 2005, the impact to the housing market came in waves, said Krueger, the Nashville agent. First, investors snapped up homes to rent, she said, then families came during bouts of hiring.

“You had tons of people coming in and flocking to that area around Cool Springs,” she said

Coming waves of employees will be staggered, so the effects won’t be dramatic. Averaged over the seven years, Amazon would be adding about 180 employees a quarter. The Nashville region could absorb that through new construction, said Terrazas: “That’s plenty of time to add the housing necessary.”

Ultimately, these new job announcements could have an effect on the market, but they are just a small factor compared to mortgage rates, tax reform, economic conditions and other larger trends.

“The macro housing forces tend to drown out some of these small moves,” Terrazas said.

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Reach Mike Reicher at mreicher@tennessean.com or 615-259-8228 and on Twitter @mreicher.