Gimme Shelter

Step right up to the roller coaster that is residential real estate. For home sellers, home buyers, Realtors, mortgage lenders, and anyone in the business, the past few years have been a wild ride.

We’ve gathered three of the area’s top residential real estate experts to help guide us through where the industry has been (dealing with housing shortages, a pandemic, up and down interest rates), where it is now (a seller’s market but with buyers wielding a lot of clout), and what’s coming up (BlueOval City).

Carmen Prince has been in the real estate business for 19 years and is president of the Memphis Area Association of Realtors (MAAR). She sold predominantly in the Tipton County area most of her early career and now focuses on Shelby, Fayette, and Tipton Counties. She has been with Crye-Leike since 2015.

“It was such a wild and crazy ride for two or three years,” she says. “Now the market is correcting itself.”

Nancy C. Huddleston has 13 years in the business, with extensive experience in sales and finance. She is with Coldwell Banker Collins-Maury and has earned numerous accolades. She is a Certified Luxury Specialist, is president of the Memphis Multi-Million Dollar Club, and is on the board of Leadership Collierville.

“My job is to take people around and let them fall in love with the house,” she says. “And then I do all my work. I’m such an optimist. My attitude is that no matter what, I’m going to sell real estate.”

Leon Dickson Sr. is the owner of BenchMark Realtors. A Realtor for 35 years, he was president of MAAR and was the organization’s Realtor of the Year. He was the first Black Realtor of the Year for the Tennessee Association of Realtors. He’s involved in the National Association of Realtors, serving on several committees. He is also chairman of MLGW’s Board of Commissioners.

“I’ve always said that I get out of real estate what I put in it,” says Dickson. “So, no matter what the market is doing, I don’t allow the forecast to interfere with my work ethic. When somebody says the sky’s falling, then everybody goes in the house — but the person who stays outside keeps selling.”

The Market

The residential real estate market has been buffeted by several factors. To gain some clarity, our Realtors offer us history and context.

Prince says that to understand the current market, it’s useful to go back a few years. “Prior to the pandemic, we started seeing a little bit of shortage of inventory, and that all stemmed from the Great Recession that happened from about 2007 to 2009. Builders stopped building, a lot of builders went out of business, and that lack [of construction] over a number of years really and truly made a shortage of inventory that we’re experiencing now.”

She says that most first-time home buyers don’t start at the very top new construction level, but are looking for starter homes. But with fewer new homes, there weren’t as many people moving out of existing homes, resulting in a shortage for first-timers.

“Then the pandemic hit and interest rates plummeted, opening the doors for a lot of people,” Prince says. “First-time home buyers and people who wanted a bigger house created the frenzy that we had in 2021 and 2022. At the end of 2022 is when we started seeing interest rates rising because of inflation. It put a damper on housing markets. It was like a light switch went off when January 1, 2023, rolled around. Buyers started looking again. They were comfortable with the interest rates rising. People were still needing houses.”

Prince says that national news made it seem like the sky was falling, “but real estate is local, and what’s happening here in Memphis doesn’t mean that it’s happening in California or Florida or New York or Texas. Our buyers and our sellers were still selling their homes and buying homes.”

She says that while sales have been down in 2023, “the average sales price of a house is up 2.1 percent over this time last year. Sales are down, but sellers are still getting their price for their house.”

One aspect that has changed is the time that a house is on the market. “It’s not one or two days on the market anymore,” Prince says. “We’re looking at 30 days, 60 days, 90 days on market.” Some buyers thought that they could undercut the asking price for a home that had been on the market for weeks, but, she says, it wasn’t changing. “Sellers are still driving the market,” she says.

“My advice to that first-time home buyer is, if you can stomach that interest rate being high right now, go ahead and buy that house… You’re not locked into that rate for the whole 30 years.” — Carmen Prince

There is still a shortage. Realtors use Multiple Listing Services (MLS) data to understand market inventories, and Prince compared the number of active houses in May of 2022 — 2,191— to the number a year later, which was 2,280. “We have just a little bit more inventory right now, but we’re still at the same point we were last year. So that’s the reason prices are seeing a little bit of an uptick. It’s supply and demand.”

“If you go back pre-Covid, it was a pretty level market,” Huddleston says. “We’re in a level market again and it really is a better time for buyers because in the past three years, everything was inflated. You’d have multiple offers on a house, and people were paying over what the appraisal probably would be or should be, and they didn’t care. They wanted that house. You still have multiple offers in certain areas, but most of it is more level. That gives the buyer time — they don’t have to be in a frenzy and spend money where three years down the road they’ll wonder, ‘What in the heck did I do?’ In a lot of ways, it’s better for the seller and the buyer.”

At present, the inventory is low and it’s a seller’s market, but it’s not a simple situation. “In a way, it drives more business,” Huddleston says. She recently hosted an open house visited by 13 families. “We have a strong market in Memphis. And yes, the rates have been a little tricky, but there are so many lenders out there that work with first-time homebuyers and they offer different incentives.” Plus, she says, financial experts are saying it’s okay to buy now. “This mortgage isn’t set for life — you can refinance one day.”

Dickson notes that the recent housing shortages affected both existing homes as well as new construction. But even with the added complexities of the pandemic and the economy, there were, for him, some good results.

“I’ve had my company now for about 17 years,” he says. “And financially, the first complete year of the pandemic was my best year in a long time. We had a greater cashflow during the pandemic than we did in any other period in a long time.”

The times were certainly different for Realtors. Dickson gives some examples: “Moving through the pandemic, we had issues showing properties. There was masking, and people not wanting buyers in their houses at certain times. And some people just pretty much took their houses off the market because they were afraid, which was understandable.”

But things did get better. “People were still buying houses and still closing. Coming out of the pandemic, we still had low inventory and new construction still being built.” Dickson notes that prices were going up, and then interest rates rose too. “Buyers would get less house but for more money. And that’s sort of still going on. In fact, that market squeezed a lot of buyers completely out of the housing market.”

Still, there were problems related to the changes. “I had quite a few deals fall through,” Dickson says. “When the buyer went on the contract under one interest rate, by the time the builder finished building, the interest rate had increased dramatically. The buyer’s DTI (Debt-to-Income Ratio) changed because of that, and they no longer qualified.”

For Dickson, the situation he is seeing now has changed. “You used to buy a pretty decent house at $125,000. Now you’d be hard-pressed to get a buyer to be excited when they walk into one of those houses.” And even though it’s currently considered a seller’s market, the trend of having multiple offers is not as prevalent now.

At one time, buyers just wanted a house. “They would give up closing costs, and the seller didn’t have to do any repairs, no home warranty. Now buyers have become more selective as to what they will and won’t accept. They have choices and are not just accepting a house because it was placed on the market.”

The seller’s market, he says, has softened, although due to the low inventory, it’s not a buyer’s market. So, sellers are becoming more flexible, Dickson says, and there is also a trend of “mortgage companies becoming more creative with their loan programs. They’re trying to tailor their loan products more to the buyer so that they can close more loans and that’s as a result of high interest rates.”

Looking ahead, Dickson says, “If I had a crystal ball, I would expect a year from now that the inventory would still be somewhat slowed unless the rates change. Because when your rates go up, then the person who was thinking about selling may not want to since they’ll soon be a buyer. Quite a bit of whatever money the seller might make may end up getting used to get into their new house. So that in itself is causing the market to stay where we have low inventory.”

Interest Rates

Interest rates in the past have been historically high, and then they dropped to historical lows,” Prince says. “We’re now in the middle and our market is correcting and eventually it’s going to stabilize. Once it does and quits going high, low, high, low, those people that have put it on hold by not buying the house are going to enter the market again. And whenever it does, it’s going to create another frenzy. That’s my opinion, but I follow a lot of economists, especially Dr. Lawrence Yun, the NAR [National Association of Realtors] economist. He predicts that by the end of 2024, the country is going to be out of this mini-recession and we’re going to start seeing a little bit more stable economy and more stable interest rates. So, I feel like we’re getting back on track. We’re moving forward and our market will correct itself.”

Huddleston thinks the rates won’t go too high. “Everything feeds off real estate,” she says. “When real estate is booming, it’s feeding so many different companies and it just makes the whole world go; it helps the economy. And I think people are used to the rates now. [Rates in mid-June of this year were about 7 percent.] When you compare it to the rate many years ago at 21 percent, are you kidding? This is a great rate. I hope that they’ll keep it at that and maybe come down a little. I think it’ll happen.”

Mortgage interest rates were at record lows in 2020 and 2021 thanks to the pandemic. The big jump started in 2022 and even though it was widely acknowledged that rates would be going up, it was still, as Huddleston says, “a little bit of a culture shock, I think more for first time home buyers. Jumping up to a 7 percent rate meant a lot of difference in their monthly note.”

But soon enough, the rise in rates was seen as the new norm. “I think most people were like, okay, we get it. I think people just had to accept that’s where the rates were.”

Hotspots

A hotspot for you might not be a hotspot for somebody else,” Huddleston notes. She observes that Downtown and South Main, for example, “are big for people who love and embrace Downtown, and want the convenience. Maybe they work Downtown or they travel a lot and it’s easy. They hop on the interstate and they’re at the airport. They like the Grizzlies, they like the arts, they like the Orpheum. Those are hotspots for those type of people.”

But different homebuyers have different needs. “There are hotspots in Collierville, Bartlett, Arlington, and East Memphis because of the schools. Whether it’s for scholarships or education or soccer or baseball or basketball, it really varies according to the family’s needs.”

In a way, all of Memphis is a hotspot considering the relative cost of living in the region. “We are so affordable,” Huddleston says. “Compare Memphis to Nashville — Nashville’s like L.A. now. When you have clients come from New York and California, it blows their mind. And then we have FedEx, we have International Paper, we have St. Jude, we have the Grizzlies. We have so much in our city.”

There is also a growing interest in areas outside of Shelby County. “We’re seeing a lot of growth in Tipton, Fayette, and DeSoto counties,” Huddleston says. And there’s plenty of land in those areas.

Prince says that the situations in Fayette and Tipton counties are illustrative. “Fayette County has seen a fairly large jump in their average sales price,” she says. “In 2022, their average sales price across the board was about $320,000. Now we’re at $400,000, about 25 percent higher in price than this time last year. And then in Tipton County, we’ve seen a lot of construction. The sales price from new construction is about $415,000.”

Prince says Tipton and Fayette are more affordable due to lower property taxes. “When you buy a $350,000 house in Tipton County versus a $350,000 house in Shelby County, your note will be different because the tax base is lower in Tipton than in Shelby.”

Dickson says there are a lot of great buys in most segments of the city at every price point. “But I would say a couple of specific hotspots would be the Binghampton area and the 38117 ZIP code area in East Memphis.”

Jumping into residential real estate is tricky in the simplest of times. These days, it behooves you to be even more well prepared than usual, whether buying or selling.

The market in 2023 is challenging assumptions, so don’t rely on conventional wisdom. For example, the home inventory in Germantown dropped about 28 percent from April of 2022 to April of this year. Yet the average sales price has jumped 7.2 percent in the same time period. And it’s a seller’s market, yet buyers are able to call a lot of the shots.

Details matter, so get ready to do the homework: If you’re buying, know your budget, have some ideas where you want to live, and be flexible. If you’re selling, clean up the property, research property values in your area, and be flexible.

The Future

The elephant that recently entered the room is the development of BlueOval City in Haywood County, where Ford Motor Company is building an assembly complex for their new electric F-150. About 5,800 jobs are expected to be created. The project site sits about halfway between Memphis and Jackson with nearby cities of Arlington, Brownsville, and Somerville expected to be heavily impacted. “Think about all the people living around there,” Huddleston says. “It’s going to be another suburb.”

Prince says, “we have seen a lot of out-of-state buyers coming to our area. I think one thing that we will continue to see is buyers coming in because of BlueOval City. That is going to really take and shape our real estate industry in 2024, because they expect to be up and running by 2025.”

Shaping that market, Prince says, will be the heavy-hitters in upper management. “They’re going to be looking at Arlington, Collierville, Germantown. And they don’t mind commuting 45 minutes or an hour back and forth to work.”

“In one to five years,” Huddleston says, “you’ll continue to see a lot of movement out in Fayette, Tipton, and DeSoto Counties because you can build — there’s new construction. There’s not as much new construction in Memphis. I think the trend is seeing more growth out there, including better schools in those counties.”

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Tips for Buyers

Getting a first home is daunting in any case, and the current market situation can create an even bigger challenge. But there are basic boxes a buyer should check no matter what the market or economy is doing.

“Buyers need to decide what’s important to them,” Prince says. “Do they want to live close to their children’s schools? Close to where they work? Close to nightlife?”

“I would get them in touch with several top lenders,” Huddleston says. “We have lots of great lenders in town and it really helps a first-time home buyer to have an in-town lender versus out of state because they’ll work closely with them. You’re not talking to somebody that you’ve never met. Give them an idea of what you want to spend and they’ll give you an idea of what your note will be. Some of the home buyers are really surprised. They’re like, ‘Oh my gosh, my mortgage can be what I’m paying in rent.’ Once they’re comfortable with it, then we go out and look.”

Dickson says that buyers have a great resource when they choose an agent they can trust. “Listen to them,” he says. “This is what we do on a day-to-day basis. We are experts. We know the loan programs. We understand the interest rates. We understand how to get people in the house for as little money as possible. We understand what the sellers will and won’t do. We understand which areas are really hot, which houses are going to have multiple offers.”

He also says that even though it’s nominally a seller’s market, buyers have been able to get some concessions. “Some sellers are paying closing costs. They’re paying purchasing home warranties. They’re doing repairs. They’re even doing the appraisal repairs as well as the home inspector repairs. And then they’re also doing buydowns on loans for the buyer so that they can qualify.

All that said, Dickson urges buyers to be flexible. “Be open to other locations. There are a lot of great spots in Memphis.”

Prince notes, “Because the market is still competitive and being driven by sellers, they need to put their best foot forward whenever they’re making an offer. My advice to that first-time home buyer is, if you can stomach that interest rate being high right now, go ahead and buy that house. If you can possibly make that payment for 12 months or however long it takes for an interest rate to go down, you can refinance and be more comfortable. You’re not locked into that rate for the whole 30 years.

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Tips for Renting

The rental market has also been motivated by the pandemic and economy. It’s further affected by companies buying a substantial number of houses to rehab and return to the market.

“In the past couple of years, the rent amounts really started going up,” Huddleston says. “This year, I think all these apartments and big apartment complexes figured the rates are going up and renters can’t afford to buy, so they’ll jack up rents. In a way, I can see why — big companies are doing that. But if rents are too high, they’re going to lose people. That’s why we think buying is still very strong for first-time home buyers. A couple years ago you could say you’ll save $400, but if they can match what they’re renting and own, go for it. And if the rates go down, refinance. At least it’s their money, not somebody else’s.”

Dickson thinks the rising rental rates “have probably pushed more people into home ownership. If you can rent a property for $1,700 and you can own a property for $1,700, why not own the property?” And, he says, mortgage companies have gotten creative with financing for the buyer. 

Tips for Selling

Huddleston says, “It’s a whole new world now. The past couple of years, sellers had it made. They had us come in and we did our thing, told them what to do with the house, put a sign in the yard, and boom, they had multiple offers.”

She says that there are still multiple offers, but most sellers now have to be more prepared with repairs in their houses. “I tell them that before they list, have a home inspector come and let’s go through and make the repairs that need to be done before you go on the market.” Buyers are now asking for more repairs than in past years, even in today’s sellers’ market.

If the seller hasn’t done it before, it may be eye-opening to get a house truly ready to go on today’s market. It’s not enough to tidy up a bit. Removing clutter and improving curb appeal can be a major undertaking. “If you know you’re moving, put stuff in the garage,” Huddleston says. “Even family pictures. I always tell sellers I love their pictures, but they’re going to be on display in the new house. Make the house you’re selling minimal so people can come in and visualize what they will put on the wall and accessorize.”

That goes for the outside as well. Mulch the yard and make it look well-manicured, Huddleston says. “When they see that, they know that when they go in, that house is meticulous, versus seeing a yard that’s not taken care of. I am a stickler. Get your house ready, because if not, I can’t maximize what you’re going to get out of your house. I always say, I’m the eyes of the buyers.”

Prince echoes that advice. “Sellers know they’re in the driver’s seat, but they need to realize that it’s going to take 30 days, 60 days, maybe longer in some instances to sell the home. Buyers are looking for move-in readiness — they don’t want a project. And I cannot stress enough that more curb appeal means so much as a first impression.”

Once the seller has signed the agreement with the agent, it’s good to know what’s happening next.

“We bring in a professional photographer,” Huddleston says. “The photographer will do videos, and high-end pictures, and even drone shots if the property has lots of land. And we bring in stagers if we have to place furniture in the house. A lot of times you have empty houses: Sometimes they look great and don’t need it, but sometimes you need a stager to come in.”

And then the hard work begins. Huddleston says she insists on getting feedback after showings and then negotiating offers. “My job is to make it so easy for the sellers that they can maintain their lifestyle, do their jobs, and let us do all the work.”

The work continues. “Once we get it under contract, then you have an inspection, so we monitor that,” Huddleston says. “The buyer’s agent will come with the inspector and the clients, and after that’s done, she’ll send us a list of repairs — and I educate the seller on what repairs I think they should do — and we negotiate constantly.”

Once that’s resolved, the buyers will do a final walkthrough a few days before closing and get the receipts of all the repairs. “And then I sit at the table with them at closing,” she says, “so I am there every second pretty much of the 30 or 45 days, because that’s my job.”

Dickson says that sellers should realize that buyers are not as desperate as before. When buyers were just focused on acquiring a house, sellers didn’t feel the need to do lots of repairs or get the house entirely ready. “That has changed,” he says. “Buyers are not as flexible and are not just accepting anything that the seller puts on the market. Sellers need to be prepared to put a good product on the market.”

Sellers, he adds, “should always consider the other properties comparable to theirs in the vicinity of their property. Because if all the houses are priced within the same range, but their house is not up to par, the buyers are going to select the other properties. And if their property sits on the market too long, then the next buyer is going to think something is wrong and bypass it. Sellers need to put their best product on the market the same way that they would be expecting to find a house that they’re looking for.”