Getahn Ward, and Mike Reicher

The Tennessean

In Nashville, the average number of homes for sale in the first quarter dwindled by 66 percent from 2012 to 2017.

That was fourth sharpest drop among the nation's 100 largest metro areas.

The tight local supply of homes is taking a toll on potential Nashville area buyers.

Finding a home is especially tough for would-be first-time buyers seeking to spend $200,000 or less.

Agnes Vinson and her husband Herman have made offers on homes in Nashville's Antioch-Priest Lake area twice over the past month, only to lose out to higher bids.

“Competition is really tight — it’s very tough,” said the restaurant manager, whose family shares an apartment at the Nashboro Village community off Murfreesboro Pike. “The bidding is the hard part. Even though you've put down like $30,000 higher already, you're still not going to be able to get it because somebody's going to offer higher than that."

Such bidding wars are now commonplace in the Nashville area, where over the past five years the inventory of available homes declined at the fourth highest rate among the nation's 100 largest markets, according to an analysis by The Tennessean and the Associated Press. The low supply is also driving up costs, with the median price of a Nashville-area single family home reaching an all-time high of $273,500 last month based on a separate report by trade group Greater Nashville Realtors.

Finding a home is especially tough for would-be first-time buyers such as the Vinsons, who were pre-approved for a $200,000 mortgage loan but have decided to raise their offer price to boost chances of a winning bid. “Under $250,000, it’s literally a fight and you have multiple offers,” said LaTonya Martin, the Vinsons’ real estate agent with Grande Style Homes in Nashville. “I’m telling clients you literally can’t be that picky anymore. You have to be strategic, making sure that you present the best offer upfront.”

​The Tennessean analyzed Nashville-area trends, using data from home shopping website Trulia.com that was compiled by The Associated Press. In Nashville, the average number of homes for sale in the first quarter dwindled by 66 percent from 2012 to 2017 — the fourth sharpest drop among the nation's 100 largest metro areas, according to the data. The biggest drop in Nashville's inventory came during 2014 and 2015. Compared to the same period last year, the inventory in early 2017 was mostly flat.

Only Salt Lake City, Seattle and San Diego saw steeper declines. An average of 12,600 homes were for sale in the Nashville area each month from January through March of 2012, while in 2017, the average monthly inventory for the same period was just 4,300 homes.

Generally, the spring is the busiest time for the real estate the market. This year, that busy season started earlier in Nashville, said Greater Nashville Realtors' President Scott Troxel. This likely means buyers in the market aren't going to have as many homes to choose from, he said.

"The inventory has been whittled down since January well below already low levels," he said. "The sustained demand that we see will mean an even more competitive environment with fewer homes than last year. Even more sharks chasing the same fish."

Troxel said the sharp five-year decline in Nashville’s home inventory is due, in part, to the abnormally high number of foreclosed homes and distressed properties on the market in 2012.

Some types of homes are now more scarce than others. Trulia divided the market into three levels, based on home value: starter homes, trade-up homes and premium homes. The number of starter homes and trade-up homes for sale in Nashville dropped at a faster pace than premium homes over the five years. In the past year, the premium homes inventory actually bumped up by 4 percent.

Troxel attributed a more stable inventory in 2016 partly to a slowdown in the second half of last year — due to the U.S. presidential election. "Buyers get distracted during elections," he said. "Just a little bit of doubt or uncertainty can throw them off. It isn’t a matter of who is going to win or who won — it's just a wee bit of doubt that takes away their concentration on buying a home."

Richard Exton, an appraiser with Manier and Exton in Nashville, said his own analysis of Greater Nashville Realtors data shows the local inventory was down 43.6 percent during the five-year period between March 2012 and 2017 versus the higher decline shown in Trulia's data.

Exton sees a correlation between the shorter number of days Nashville area homes are spending on the market and inventory levels. "That you've got a significant decline in the inventory yet you've got record sales, the factor seems to be that it's taking much much less time to sell homes than it took five years ago," he said.

Homebuyers' angst

The tight local supply of homes is taking a toll on potential Nashville area buyers such as Josh Hing, who earlier this year put his search on hold after losing out on several competitive bids.

“It was discouraging going through the stress of waiting the night before to see if I was actually going to be able to get the house under contract — or not, just to wake up the next day to learn that I didn’t get the house,” said Hing, who works in banking and shares an apartment with two friends. “It’s forcing me to continue to rent. It’s not giving me the option to invest in something for me in the future.”

First-time homebuyers Leslie Rothenburg and her boyfriend Christopher Martin also lost out to a higher bidder before entering a for-sale-by-owner contract that’s expected to close at the end of May. “We looked at a lot of houses,” said Rothenburg, whose targeted price range was around $200,000. “They all just get snatched up so fast.”

The couple wanted to stay in the northeast part of Nashville where they rent a home on East Trinity Lane. “Our major problem was just trying to find one that’s suitable on this side of town,” she said. “It seems that when the house is decent, it’s going for much higher than our price range."

As the supply of homes declined, the listing price climbed — especially in the trade-up and premium markets. The median listing price of trade-up homes rose 52 percent to $221,597 between early 2012 and 2017, while Trulia's data also showed the price of premium homes rose 44 percent to $437,967. Meanwhile, the median listing price for starter homes increased 36 percent to $108,783.

Rothenburg and Martin are taking advantage of a Tennessee Housing Development Agency program that will provide $15,000 in down payment assistance and closing costs. They plan to move into their new home in May, in the Talbot's corner area off Dickerson Pike.

Multiple listings

Kimberly Cunliffe, Rothenburg’s Realtor with The Wilson Group Real Estate Services in Nashville, isn’t surprised by Nashville’s fourth place nationwide ranking for declining inventory. “We hope that the inventory issue would get better every spring, yet it seems to get worse," she said. "There's so many more buyers looking out there than there are houses available for them to buy."

Cunliffe said she's seeing an average of five to six offers on homes that she lists, with one recent property attracting 26 bids — and most well over the listed price of the property. "Five years ago, a multiple offer situation was typically two to three offers per listing," she said.

Cunliffe is also seeing more cash buyers who often get the upper hand, including people who are moving to Nashville from other states. "One way buyers can set themselves apart is by writing a clean offer, meaning relieving the seller from duties such as performing repairs to the home and not asking them to pay for a home warranty," she said.

The Associated Press contributed to this report.

Reach Getahn Ward at gward@tennessean.com or 615-726-5968 and on Twitter @getahn.

National forecast

About 1.75 million homes were for sale nationally at the end of February, according to the National Association of Realtors. That's down 6.4 percent from a year earlier and only slightly up from January, when listings reached their lowest point since the association began tracking them in 1999. All told, the supply of homes for sale has fallen on an annual basis for the past 21 months.

Despite the scant supply, U.S. home sales are expected to rise this year, economists say. Fueled by job growth, pay raises and still-low loan rates — and perhaps fearful of being left out as more homes are snapped up and prices rise further — many people are looking to buy.

Dwindling Supply

Out of the nation's 100 largest metro areas, Nashville saw the fourth largest drop in home inventory from 2012 to 2017.

Salt Lake City, Utah: -69.5%

Seattle, Wash.: -66.6%

San Diego, Calif.: -66.5%

Nashville, Tenn.: -66.0%

San Jose, Calif.: -63.5%

Source: Trulia.com