Has the thought of buying a Nashville investment property crossed your mind? If so, you must be curious to know how the Nashville housing market is expected to perform in the coming months. In this case, you’ve come to the right place as here you will find the most important Nashville real estate market trends 2020.
Factors Shaping Nashville Real Estate
Understanding the larger demographic and economic situation is important for making sense of any US housing market forecast 2020. So, before we jump into the Nashville real estate market forecast for 2020, let’s have a look at what affects it the most:
The Already Large Population Is Growing Fast
Experienced real estate investors and other experts are well familiar with the fact the demographics is one of the key factors determining the performance of commercial and residential real estate markets. With over 692,000 residents, Nashville not already has large population, but this population grows at a rate of more than 100 new people a day. This makes Nashville’s population growth one of the highest in the country. From property investor’s point of view, this means that demand for rental properties in the Nashville real estate market will increase in 2020 and beyond.
The Diverse Economy Is Expanding Quickly
The capital of Tennessee benefits from a diverse economy, which is one of the most important prerequisites for real estate growth. Nashville is actually highlighted as a Southern boomtown as it constitutes the 3rd fastest growing economy in all of the US right now. This trend is expected to carry on into 2020 and beyond. Medical services is one of the main industries as Nashville hosts over 300 companies in this field. Music is the 2nd major sector which led to Nashville’s nickname Music City. Indeed, this is the 2nd largest music production center in the US after New York. Other significant industries include publishing, banking, and transportation. What should have caught the attention of those considering to invest in real estate in Nashville is the fact that these are all high-paying jobs, which contributes to the positive outlook for the Nashville housing market for 2020 and beyond.
Tourism Is Booming
Another major factor which affects the performance of any US housing market is the tourism industry. Nashville outperforms many other US cities in this regard as well. Music City welcomes over 15 million visitors per year, and the music production industry is the main attraction for both leisure tourists and business travelers. This makes Nashville one of the top tourist destinations nationwide, which creates strong demand for Airbnb Nashville and assures a high Airbnb occupancy rate.
Current State of the Nashville Housing Market 2019
Before we get to the Nashville real estate market predictions for 2020, we should have a quick look at its performance in 2019. The numbers below have been computed by Mashvisor’s investment property calculator using comprehensive Nashville, Tennessee property data and predictive analytics.
Nashville Real Estate Market 2019 Figures
- Median Property Price: $435,900
- Real Estate Listings: 1,267
- Days on Market: 63
- Price to Rent Ratio: 21
- Traditional Rental Income: $1,760
- Traditional Cap Rate: 1.9%
- Airbnb Rental Income: $3,960
- Airbnb Occupancy Rate: 62.1%
- Airbnb Cap Rate: 6.3%
To get a full picture of the condition of the Nashville housing market at the moment, you can read our comprehensive Nashville real estate market report 2019.
Major Trends in the Nashville Real Estate Market Forecast 2020
Now that you know how Nashville real estate investments are currently performing, it’s time to get to the Nashville housing market predictions for 2020. This article is based on a review of the forecasts of various Nashville, TN real estate experts as well as Mashvisor’s own real estate market analysis.
1. Real Estate Prices Will Appreciate
The prices of homes for sale in Nashville, TN have increased by 120% since the beginning of 2000, which exceeds both the state level and the national level of real estate appreciation over this period. The Nashville housing market predictions for the next 5 years are that natural appreciation will remain strong. The main supporting factors include the fast population growth and the economic expansion accompanied by the creation of new high-wage job opportunities.
2. Nashville, Tennessee Homes for Sale Will Remain Affordable
While real estate appreciation is expected to continue happening in Music City, it is not forecast to compromise affordability. Even though houses for sale in Nashville, TN are listed for about double the average home price in the US, their values are comparable to those in other best places to invest in real estate such as Dallas, Chicago, and Atlanta, according to Mashvisor’s real estate data and analysis.
Real Estate Expert Tip: If you are looking for cheap real estate investment properties, check out foreclosed homes for sale in Nashville, TN as well as off market properties. You can find both on Mashvisor’s platform.
3. Nashville Will Remain a Buyer’s Market
Unlike many other top performing real estate markets across the US, Nashville is already a balanced or even buyer’s market in 2019. This Nashville real estate market trend is expected to carry on into 2020 and beyond. PwC’s Emerging Trends in Real Estate: United States and Canada 2020 report ranks Nashville as #4 among all US markets in terms of homebuilding perspectives. This means that although it faces the 3rd strongest investor demand, inventories will remain sufficient, and bidding wars will be rare. This is a strong positive indicator for real estate investors who don’t have to expect to pay more than the listing prices for homes for sale in Nashville, TN.
Related: Will the 2020 US Housing Market Be a Seller’s Market or a Buyer’s Market?
Moreover, PwC ranked Nashville at position #3 with regards to real estate development and redevelopment opportunities and named it a leading 18-hour city. All these factors come together to rank Music City as the 3rd among the US Markets to Watch for Overall Real Estate Prospects, up from position #5 in 2019. The confidence which such a prestigious publication places on the Nashville real estate market 2020 is a major signal for a positive forecast.
4. Single Family Homes Will Dominate the Nashville Housing Market
Single family homes for sale in Nashville, TN are the most numerous type of property listings with a share of 68%. The second most popular property type among Nashville real estate listings on Mashvisor’s platform is townhouses with a share of 11%. Townhouses, however, are the most profitable rental property type as they offer the highest return on investment for long term and short term rentals. Single family homes generate about the same cap rate as townhouses when rented out on Airbnb and similar platforms, but they bring lower return as traditional Nashville rental properties.
5. Nashville Rental Properties Will Enjoy High Demand
Demand will be strong for both traditional Nashville investment properties and Airbnb Nashville rentals. Nearly half (48%) of Nashville’s population rents a property rather than owns a home, which means that there are over 331,000 renters there. The rental demand will only intensify in 2020 and beyond as the population keeps growing. The high price to rent ratio of 21, which means that renting is more affordable and makes more financial sense than owning, contributes to this important Nashville housing market trends. In terms of short term rentals, the 15 million annual Nashville visitors will create demand and raise the already high Airbnb occupancy rate even more.
6. Return on Investment Will Be High in the Nashville Real Estate Market 2020
Moving into 2020, long term Nashville investment properties will continue generating a high rental income, which will lead to a cap rate of 1.9%. Meanwhile, the numerous visitors attracted to Music City each and every year make Airbnb Nashville a very profitable real estate investment strategy. The rental income which an average house rented out on short term basis brings amounts to $3,960, exceeding significantly the traditional rental income. Moreover, the return on investment equals to a very good cap rate, 6.3%. With property financing, Airbnb Nashville investment properties can generate a very good cash on cash return as well.
Real Estate Expert Tip: To boost your return on investment, it is important to buy an investment property at the lowest possible price. Working with one of the top Nashville real estate agents will help you negotiate a good price and close the deal fast.
Experienced real estate investors might find these rate of return figures discouraging as they consider a good cap rate to exceed 8%. However, beginner investors should keep in mind that these are only city averages, while the top Nashville neighborhoods as well as individual rental properties can generate much higher return on investment.
7. Airbnb Nashville Will Not Constitute a Viable Real Estate Investment Strategy
Since we’ve mentioned Nashville vacation rentals and showed how profitable they are, we have to take a look at the Airbnb laws and rules regulating the Nashville real estate market 2020. Unfortunately for full-time and out of stat real estate investors, Music City joined the many US and global cities which decided to impose severe restrictions on the short term rental industry. In January 2018 the Nashville Metro Council passed a bill which aimed to phase out non-owner occupied short term rentals in residential Nashville neighborhoods within the next 3 years. However, the issue was taken further, which resulted in two different decisions by the House and the Senate and a final decision by a conference committee. The final status of the Airbnb Nashville rental business is that already registered short term rentals can continue to operate, whether owner-occupied or non-owner occupied, regardless of their location. However, licenses cannot be passed down during the sale of an investment property. Moreover, new licenses in residential Nashville neighborhoods will be issued to owner-occupied short term rental properties only. Non-owner occupied Airbnb rentals can operate in non-residential areas exclusively.
All in all, this means that out of state real estate investors as well as full-time investors cannot make money with Airbnb Nashville. This is one of the leading Nashville real estate market trends in 2020.
If you are interested in investing in an Airbnb rental property, have a look at Buying a Short-Term Rental? Invest in the Most Airbnb Friendly Cities.
Best Neighborhoods in Nashville for Investing in Rental Properties in 2020
Considering all these Nashville real estate market trends for 2020, buying an investment property in Music City looks like a profitable real estate move. If you are thinking about making a Nashville real estate investment in 2020, you might be worrying about the hard market research and investment property analysis work ahead of you. To help you get started and eliminate the need for neighborhood analysis, we’ve put together a list of the best Nashville neighborhoods for real estate investing.
Top Nashville Neighborhoods for Traditional Rentals
1. Elizabeth Park
- Median Property Price: $254,000
- Average Monthly Traditional Rental Income: $1,580
- Average Traditional Cap Rate: 3.5%
2. West End Park
- Median Property Price: $670,600
- Average Monthly Traditional Rental Income: $2,550
- Average Traditional Cap Rate: 2.7%
3. Capitol View
- Median Property Price: $291,700
- Average Monthly Traditional Rental Income: $1,500
- Average Traditional Cap Rate: 2.4%
Top Nashville Neighborhoods for Airbnb Rentals
Remainder: Before exploring the investment opportunities in Airbnb Nashville, remember to review the limitations outlined above.
1. Haynes Area
- Median Property Price: $236,800
- Average Monthly Airbnb Rental Income: $4,860
- Average Airbnb Cap Rate: 16.0%
- Average Airbnb Occupancy Rate: 54.2%
2. Hadley Park
- Median Property Price: $393,000
- Average Monthly Airbnb Rental Income: $6,650
- Average Airbnb Cap Rate: 12.5%
- Average Airbnb Occupancy Rate: 52.1%
3. Cayce Homes (MDHA)
- Median Property Price: $390,000
- Average Monthly Airbnb Rental Income: $5,530
- Average Airbnb Cap Rate: 11.4%
- Average Airbnb Occupancy Rate: 60.3%
The most prominent Nashville real estate market trends 2020 outlined above point out to a strong, growing housing market with major investment opportunities. While Airbnb Nashville is not a feasible investment option, traditional rentals offer a high return in both the short term and the long term. Equipped with the best real estate investment tools, even beginner investors can find a profitable rental property in the Nashville housing market in 2020.
To turn 3 months of research into 15 minutes and find the top-performing investment properties in Nashville and any other US market, sign up for a free trial with Mashvisor now for a 15% discount afterwards.