WSJ sees Nashville bucking home sales slump

Economists reverse gloomy view of prior forecast

The real estate soothsayers just can't seem to make up their minds about Nashville.

A periodic forecast of home sale prices in The Wall Street Journal has turned bullish on the city once more -- just months after predicting that the Nashville area would become one of the nation's weakest markets.

The latest residential real estate forecast from the Cambridge, Mass., research firm Case Shiller Weiss cites Nashville as the only area likely to see its rate of home price appreciation rise over the coming year, among 20 major markets surveyed. Friday's Journal reported on the predictions.

In April, the same firm predicted that Nashville, in the year ahead, would become the first city in its survey since 1996 to post an actual decline in home prices (as distinct from a decline in the rate of appreciation). Some Nashville realty agents and homeowners reacted to the report with puzzlement.

"I don't know where they were getting their information," said Jack Dugger, president of the Greater Nashville Association of Realtors. "There was a lot of buzz everywhere but Nashville. Because all the numbers coming out of the multiple listing service and the sources of score-keeping, if you will, kept showing an active and very good market well ahead of last year, even equal to '99, which was best year by far in the residential."

Market-watchers as well were puzzled, in part because other prognosticators had foreseen good times. A Standard & Poor's/DRI study, published by Kiplinger's Personal Finance magazine in January, projected a 7.5% increase in Nashville's median home price during 2001, eighth highest among the 113 U.S. cities covered.

The median is the price at which half of the homes sell for more and half for less. Standard & Poor's/DRI gave Nashville's median price as $126,688 at the beginning of 2001, projected to reach $136,192 by year-end. Data from the National Association of Realtors say Nashville's median existing-home price was $127,000 at the end of the first quarter of 2001.

Case Shiller Weiss, calling the median "a very unreliable indicator of actual price changes through time," evaluates the market through its own "Case Shiller Index". It bases its predictions on past sale prices, the number of homes on the market and the number of people setting up new households.

The new survey singles out Nashville as a rare bright spot in a weakening housing market nationwide. Area home prices did grow only an anemic 1.6 percent between April 2000 and April 2001, according to the report, but that rate is expected to reach 3.7 percent between August 2001 and August 2002.

Nationally, the survey forecasts that prices will rise 5.6 percent, but many cities will see dramatic drops in the rate of appreciation.

According to the Journal, CSW's optimism about Nashville stems in part from the fact that "while the nation's unemployment rate has risen, Nashville's has dropped." Alas, that's not true, though the local jobless rate remains below the national rate.

The article also cites strong sales of upscale homes to relocating executives as a positive indicator, crediting the local Dell and Hewlett Packard facilities for that trend -- though it would be a surprise if such high-tech stalwarts relocated large numbers of executives to Nashville during a time of industry-wide retrenchment.

For those involved in boosting the image of a robust Nashville economy, the revised Case Shiller prediction would appear to be welcome vindication. "This probably confirms that there's greater value in not taking too short-term a view of any one piece of economic data," said Garrett Harper, research director at the Nashville Area Chamber of Commerce.

Harper compares the Case Shiller reversal to the publication, earlier this year, of census figures showing that Davidson County had gained in population. For much of the 1990s, Census Bureau population estimates had claimed that the county was shrinking.

"The Bureau consistently was reporting declines, and we said here on the ground that houses are being built, permits are being taken, and all the indicators showed real growth," Harper recalled. "By looking at Nashville up close, they could have found that some of the things we were saying all along were true."