Strong Employment Growth Leads to Near-Record Housing Construction in Nashville HMA
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
The Nashville Housing Market Area (Nashville HMA) has been experiencing strong economic growth — since 2010, the rate of job growth for the area has been double the national average. In fact, the Nashville HMA recovered more quickly from the recession than the rest of the nation, averaging payroll growth of 3.3 percent per year from 2010 to 2016. The nation as a whole began recovery in 2011 at a rate of only 1.7 percent from 2011 to 2016. Nashville is a national hub for the education and healthcare industries and is well known for music production and tourism, which make up a large part of the local economy. A recent Comprehensive Housing Market Analysis highlighted the economy and housing market of the Nashville HMA.
The Nashville HMA has experienced job growth in every employment sector over the past year, with the largest increase occurring in the professional and business services sector. The fastest job growth over the past year was in the logging, mining, and construction sector because of several major commercial projects and high levels of residential construction. The unemployment rate in the HMA was 3.6 percent during the same period.
The professional and business services sector is the area’s largest sector, followed by the education and health services sector and the wholesale and retail trade sector. Nashville is an employment hub for the healthcare industry, and many companies are headquartered in the area. The HMA’s largest employer is Vanderbilt University Medical Center, which employs 26,400 people. HCA Holding, Inc., is the area’s second-largest employer and the largest for-profit healthcare facility operator in the world, managing more than 270 facilities in the United States and United Kingdom and employing 10,400 people locally. Community Health Systems, which operates more than 200 hospitals in the United States, is also headquartered in the Nashville HMA.
Tourism is a large part of the local economy; 14 million people visited the area in 2016, and the music industry draws many of these visitors. Local attractions include the Country Music Hall of Fame and Museum, the Grand Ole Opry, and numerous music festivals. In addition, many record labels are headquartered in the HMA.
The 3-year economic outlook is for continued strong growth at an annual rate of 3.4 percent. A number of expansions and developments will contribute to this growth, including a new facility for Koninklijke Philips NV, a healthcare technology company, which will add 800 new jobs in 2019; a new expansion to an Under Armour, Inc., facility, which will add at least 1,000 jobs; and expansions at Vanderbilt University.
The sales market in the Nashville HMA is currently balanced. Employment and population growth have led to increases in home sales, sales prices, and new home construction. Home sales have increased each year since 2012, which has sent new home construction rates to near-record-high levels; construction of many new housing developments has been planned or is underway throughout the area.
Although the home sales market has been balanced in most of the area, it has been slightly tight in the southern submarket, which includes Rutherford and Williamson counties. New home construction in this submarket has not kept pace with population and employment growth, leading to record-high home sales prices.
Over the next 3 years, demand is estimated for 28,225 new homes. The 7,550 homes currently under construction will meet some of that demand.
The Nashville HMA rental market is balanced with an overall vacancy rate of 6.3 percent. The apartment market in the area is also balanced. Multifamily construction has been occurring throughout the HMA; in Davidson County, which includes the city of Nashville, 90 percent of multifamily units permitted since 2010 have been apartments. The large number of universities in the area fuels the demand for apartment rentals, and both Vanderbilt and Belmont universities are expanding their student housing over the next 3 years.
Demand is expected for 16,250 new market rate rental units; the approximately 11,000 rental units currently under construction will satisfy most of this demand during the next 2 years.