Buying a home in Middle Tennessee these days is, shall we say, challenging.

Boatloads of buyers with cold, hard cash are making multiple offers on the relatively few homes for sale. Behind them are relatively affluent two-income families that still have to go through the mortgage loan process.

And at the end of a very long and torturous line are single-income, would-be homeowners.

Last year, the median price for a Nashville home rose 22.4% from $339,000 to $414,900, the Greater Nashville Realtors report. Projections for this year expect prices to climb even higher, from 6% up to almost 20%.

In Nashville, there are at least two really good reasons why. Start with a chronic shortage of homes due to the recession of 2008, when new home construction ground to a halt after a massive default in home mortgages. Add to that a tidal wave of buyers who are moving to Music City and bringing loads of cash with them, particularly from the East and West coasts.

Realtor Thomas Williams

The income disparity between transplants and locals is significant. If you have a single income, particularly if you’re a single woman, there’s a monetary Mount Everest to climb.

“We’re seeing a huge amount of multiple buyers, and you’re competing against three or four cash deals,” says Thomas Williams, a Realtor with Tarkington & Harwell. “You’re completely out of the game.”

How we got this way

The signs were there as early as 2018 that the storm clouds were gathering for single-income homebuyers.

Jay Cleveland, founder and president of the Tennessee Peanut Company, sold his condo in 2018 with the intent of buying a farm for his family that then included wife Jessie and son Emerson (daughter Byrdie Lou came along later).

Jay and Jessie Cleveland say they were outbid on 30 homes, and that was in 2018.

-- Photo By Michelle Morrow |The Ledger

“We sold it because it seemed like a pretty good time to buy in Nashville, take the equity,” he says. “Right before we were going to buy the farm, we found out there were some structural issues, and the pricing would not allow us to have any extra to get things fixed. So we decided to pass on the farm. And that didn’t turn out well. We had to have put in offers on 30 different places, and that was in 2018 and not nearly as bad as it is now.”

The crumbling housing market began in 2007 with the subprime mortgage crisis. In a nutshell, homebuyers with below average credit histories had trouble purchasing homes before 2007 potential.

In the early 2000s, high-risk loans became available when lenders began funding mortgages by repackaging them into groups that were sold to investors. People with bad credit and high risk of default gobbled them up.

The American dream was theirs, but it was an illusion. The housing bubble burst, and many homeowners found themselves with upside-down mortgages, meaning they owed more than the house was worth. So they defaulted.

Banks were in crisis, and lending ground nearly to a halt. So did the construction of new homes.

“It’s a perfect storm,” says Steve Jolly, president of the Greater Nashville Realtors. “It mainly started after the Great Recession. We didn’t build enough homes, and the number of homes we were building in 2007… we aren’t even at that level yet.

“We barely built any homes for the first five years after the recession. And the reason is that banks were reluctant to lend to builders.”

The result was fewer homes and more buyers. Add to that the double whammy of a growth boom in Nashville and the economic side effects of COVID-19.

Nearly 2 million people live in the Metro Nashville area. Projections say another half a million will move here in the next 20 years, the Financial Times reports. Nashville, the Times states, is becoming a “supernova” city. And buyers from other areas, most prominently the West and East coasts, are showing up with bags of cash.

Last year, the average incoming buyer arrived with $736,900 to spend, compared with $573,400 for locals, Seattle-based brokerage Redfin reports. That difference in buying power is the largest of any of 49 cities Redfin analyzed.

West Meade is the priciest of the city’s 126 neighborhoods (median listing price $850,000) and Nashboro Village the least ($265,000), Redfin reports. Belle Meade, the exclusive and costly satellite to Nashville, is considered a separate city, as are neighbors Forest Hills and Oak Hill.

And with all the growth, Jolly says there’s resistance to sprawl increasingly from communities that don’t want to bear the cost of new infrastructure.

“It’s made it hard to keep up with roads and schools and infrastructure,” he says. “So you’re seeing pushback from some of these communities. You also have people who are primarily rural and they’re starting to become suburban, so you have pushback because they don’t want to see them become overpopulated.”

The coronavirus pandemic also shifted the homebuying market beginning in early 2020 when millennials who had maintained extremely mobile lifestyles decided to settle down amid growing safety concerns.

“They didn’t even think about buying until COVID hit,” Jolly says. “They wanted the safety and security of a place to live. That caused all kinds of people to try to move to single-family homes.

“On top of that, locally in Nashville, people started recognizing what a great place this is to live. We really hit the national radar in 2017. We just exploded and we haven’t been able to keep up since.

“And then land became so expensive. And with all those things it became harder to build new homes.”

Jolly estimates housing inventory nationwide is 5 million homes short. “We are probably five to 10 years away from digging out from this hole,” he says.

Back of the line

Mary Elizabeth Smithson, 29, is a renter but says she doesn’t want to be one forever. The meals manager at The Nashville Food Project wants to buy.

“I’d like to own my home,” she says. “I’ve been told a mortgage would be cheaper than paying rent, but now these houses are going for $100,000 more than they were before. So when am I ever going to get to this point? It feels like you’re constantly chasing after it, and I might be 40 before I can get to that. I feel defeated.”

There’s good reason for that.

Realtor Williams says there are several factors that are keeping would-be buyers like Smithson from gaining home ownership. One is that, with the market so tight, many homeowners aren’t selling – even if they want to – because there’s no place to buy they can afford.

“And most single people without help from family have to get a loan,” he says. “There are so many cash buyers that it takes anybody getting a loan out of the game.”

Williams says one trick some single-income buyers are using to get around the loan issue is to ask a family member who does have the cash to buy their first home. Then, after it closes, the purchaser sells it to the single-income buyer, who can then take out a loan without the pressure of multiple offers.

Smithson says she has a friend who bought a rundown house boat, renovated it and sold to get enough cash to make a down payment on a conventional home.

Neither of those workarounds are options for her.

“It feels like a losing game,” she says. “I want to make a big investment. I’m going to have to make upwards of $70,000 to think about doing that.”

As for Cleveland, he and his family are thinking about moving to a more affordable area out of state.

“I took about two years hiatus on looking in order to grow my income,” he says. “I thought maybe my problem was income. I finally got my income where I wanted it.

“I’m looking now, but there’s no way to look in Nashville. I can’t buy in Nashville. So that pushes me to the outskirts.

“But the big question is if I’m going to sever my life in Nashville, why wouldn’t I just move anywhere in the world? I can work from anywhere. We are kind of pushed out of the market and at this point I’m going through the acceptance of it.”