Economic Conditions - Nashville, TN, U.S., Global

[MLBrumby]

OK... you dusted off... I'll chime in!

I'm hearing a lot of negative things now, and the difference is it's coming from all quarters. I think the contraction in the first quarter was what sparked a lot of hat, but I have been hearing a lot of negativity with the way the president is "managing" things, even from colleagues who call themselves "progressive".  Apparently the polls bear out that many people agree we're on the wrong track (I've consistently seen 75+%). As to economists in general, I'll quote: "the risk of recession has risen to one-in-three due to the possibility of a Federal Reserve miscalculation, our current base case is for real gross domestic product (DGP) growth this year within a range of 2.5% to 3.5%. "  Bob Brinker (www.bobbrinker.com) May 2022 newsletter.  

Brinker tends to be more sanguine than most; and my experience is that he's very sober and correct more often than other prognosticators.  Hopefully his read is closer to the mark, and things get to a "soft landing", or else we can probably count on many of the large projects for Nashville (and Chattanooga for me) to be canceled or delayed by years. 

[Rick Dalton]

You can blame whoever you want, but it all leads back to COVID. We are still feeling the ripple effects. We would have naturally gone into a severe recession in 2020 but the government injected some fairly extreme stimulus.

The result is that the stimulus, combined with the COVID recovery, overheated the economy. Now, the Fed has to put the brakes on to cool it off. So, we may enter a technical recession, but it will be (in part) purposeful. 
 

I don't really blame anyone in particular for it, both of the past two Presidents have injected stimulus. There was really no way to perfectly navigate an unprecedented black swan event. All things considered, it hasn’t gone that poorly.

 

I think Nashville will fare better than most. As money gets tighter, I’m starting to see layoffs at startups, particularly in tech. Many of these companies have never experienced a rising interest rate environment, and many of them won’t survive. Nashville’s economy is healthcare, blue chip tech, education, and tourism. It will interesting to see how tourism holds up, I think it will be fine as it is domestic.
 

The 2008/2009 recession is not a fair comparison, IMO. That was a full blown disaster. This is a policy decision that most people agree with. It won’t be an overnight collapse, just a cooling off.

[samsonh]

47 minutes ago, natethegreat said:

You can blame whoever you want, but it all leads back to COVID. We are still feeling the ripple effects. We would have naturally gone into a severe recession in 2020 but the government injected some fairly extreme stimulus.

The result is that the stimulus, combined with the COVID recovery, overheated the economy. Now, the Fed has to put the brakes on to cool it off. So, we may enter a technical recession, but it will be (in part) purposeful. 
 

I don't really blame anyone in particular for it, both of the past two Presidents have injected stimulus. There was really no way to perfectly navigate an unprecedented black swan event. All things considered, it hasn’t gone that poorly.

 

I think Nashville will fare better than most. As money gets tighter, I’m starting to see layoffs at startups, particularly in tech. Many of these companies have never experienced a rising interest rate environment, and many of them won’t survive. Nashville’s economy is healthcare, blue chip tech, education, and tourism. It will interesting to see how tourism holds up, I think it will be fine as it is domestic.
 

The 2008/2009 recession is not a fair comparison, IMO. That was a full blown disaster. This is a policy decision that most people agree with. It won’t be an overnight collapse, just a cooling off.

Agreed. The freight numbers are coming down because massive new capacity has entered the market. It’s capitalism. The consumer is spending a lot, as evidenced by numbers released today. And the negative GDP print was  affected by much lower government spending and much higher imports than normal. It’s easy to be doom and gloom, but companies say the consumer is strong.

[Mr_Bond]

15 hours ago, MLBrumby said:

OK... you dusted off... I'll chime in!

I'm hearing a lot of negative things now, and the difference is it's coming from all quarters. I think the contraction in the first quarter was what sparked a lot of hat, but I have been hearing a lot of negativity with the way the president is "managing" things, even from colleagues who call themselves "progressive".  Apparently the polls bear out that many people agree we're on the wrong track (I've consistently seen 75+%). As to economists in general, I'll quote: "the risk of recession has risen to one-in-three due to the possibility of a Federal Reserve miscalculation, our current base case is for real gross domestic product (DGP) growth this year within a range of 2.5% to 3.5%. "  Bob Brinker (www.bobbrinker.com) May 2022 newsletter.  

Brinker tends to be more sanguine than most; and my experience is that he's very sober and correct more often than other prognosticators.  Hopefully his read is closer to the mark, and things get to a "soft landing", or else we can probably count on many of the large projects for Nashville (and Chattanooga for me) to be canceled or delayed by years. 

In addition to the truckers (activity suggests recession is here) and the sanguine Brinker, we can add Elon Musk (said recession will last 12-18 months) and some VC firms (my SIL shared a YouTube video released last week where a VC firm is telling startups how to survive a recession).

Several people in-the-know (including Bernanke) have suggested the Fed has already miscalculated and waited too long to start raising rates.  BTW, to fight inflation, the Fed has to get the short term Fed Funds rate above the inflation rate.  That is a significant increase from the 1% (top of range) rate today.

When short term rates go to 9% or 10%, mortgage rates could easily double from where they are today.  I'm wondering if some developers have enough of their own money that they will be less impacted by the higher lending rates.

[smeagolsfree]

I do know the new car industry is still going to hurting thru 2024. A friend of mine is looking, and they said the chips are still going to be in short supply till then. So that could affect the local auto industry.

On the local building front, I know there is a lot under construction however, the permits have been slow for the past five months, The BZA docket has been pretty much dead except for some residential for that same period, The MDHA agendas have been pretty low key as well.

The permits are probably slow due to the lack of personnel in the codes department but not sure. We have not had a ton of new announcements this year. Don't get me wrong we have had some, but not the announcements every week and a half like we were getting.

Some of this could be due to Metro adapting the new FARS code (firefighter air replenishment system). This one sort of came out of the blue and took a lot of developers by surprise. Before firefighters had to resupply by carrying their air tanks by hand into the buildings. The new code requires this system to be built into the infrastructure of the building, including air lines and separate rooms for the firefighters to change gear. Needless to say, many developers and architects had to go back to the drawing board, and this was not cheap. This could have impacted the number of announcements.

Building materials cost are changing rapidly, however I have heard that lumber may have stabilized some.

Just throwing that out there for you guys to chew on.

[titanhog]

14 minutes ago, smeagolsfree said:

I do know the new car industry is still going to hurting thru 2024. A friend of mine is looking, and they said the chips are still going to be in short supply till then. So that could affect the local auto industry.

On the local building front, I know there is a lot under construction however, the permits have been slow for the past five months, The BZA docket has been pretty much dead except for some residential for that same period, The MDHA agendas have been pretty low key as well.

The permits are probably slow due to the lack of personnel in the codes department but not sure. We have not had a ton of new announcements this year. Don't get me wrong we have had some, but not the announcements every week and a half like we were getting.

Some of this could be due to Metro adapting the new FARS code (firefighter air replenishment system). This one sort of came out of the blue and took a lot of developers by surprise. Before firefighters had to resupply by carrying their air tanks by hand into the buildings. The new code requires this system to be built into the infrastructure of the building, including air lines and separate rooms for the firefighters to change gear. Needless to say, many developers and architects had to go back to the drawing board, and this was not cheap. This could have impacted the number of announcements.

Building materials cost are changing rapidly, however I have heard that lumber may have stabilized some.

Just throwing that out there for you guys to chew on.

Don't forget interest rates.  Not sure how high those will go…but has to effect some developers.

[Rick Dalton]

Interest rates and cost of materials 

[rolly]

Nashville may do better this time from the tourism standpoint as there was a lot of fatigue from the lockdowns. People are more willing to get out and travel more now.

The govt sector for Nashville is somewhat sheltered during a recession.  Amazon is faring well through downturns, so perhaps it's large campus will continue to grow.   Also convention activity should also continue to pick up as long as no more covid shenanigans kicks up. 

[smeagolsfree]

I thought you guys were covering interest rates, but yes, that too. Also the market is another factor as some investments may have been tied up there and they may have lost on paper, but I do not think that is as big of a factor.

[BnaBreaker]

I don't know nearly as much about economics as some of you do, but it seems to me that even if there is a national or international recession, Nashville appears to be uniquely positioned to weather the storm pretty well.

Edited May 18, 2022 by BnaBreaker

[japan]

 

I think this article is readable...

https://www.wsj.com/articles/inflation-nashville-housing-prices-utilities-11654092482?st=i7acolpjv3yha27&reflink=desktopwebshare_permalink

Edited June 2, 2022 by japan

[smeagolsfree]

4 minutes ago, japan said:

 

I think this article is readable...

https://www.wsj.com/articles/inflation-nashville-housing-prices-utilities-11654092482

Nope, most WSJ articles are subscriptions as is this one. Can't get past the first sentence of the second paragraph.

[japan]

6 minutes ago, smeagolsfree said:

Nope, most WSJ articles are subscriptions as is this one. Can't get past the first sentence of the second paragraph.

Try it now.  I updated the link. Otherwise...

It's saying what we've known for awhile, that the influx of people into Nashville has caused the city to become unaffordable.  One interesting thing that I didn't know was that not only has housing costs surpassed the national average but our utility costs have also blown past the national average.

Edited June 2, 2022 by japan

[smeagolsfree]

10 minutes ago, japan said:

Try it now.  I updated the link. Otherwise ...

Thanks for getting the link fixed! Looks as if we have gone from the "it" city to the "sh*t" city.  I feel the pain of people trying to buy a home. Now with the compounded factors of inflation it just makes matters worse that were having it hard to begin with. Moving away may be in the cards for a lot of people. Jobs seem to be available no matter where you go, so finding work should not be a problem, but good paying jobs in rural areas is. It is a no-win situation. You can get a lot more housing for your dollar in Detroit, but for me I am not going to move to Detroit nor the state of Michigan. For that matter like many, not above the Ohio river, just because I don't like winter. Where I want to go is out west and the water situation is dire there so that seems to be off the table now.

Where I live a house across the street that was sell for 300k last year was for sale for 359 and they had an open house and were offered 401 that day. Two other homes in the neighborhood went for 415k & 475k. I am at a loss for words needless to say.

Nashville plus the State will have to wake up when it comes to the traffic situation at some point whether it is fixing the interstate system or adding a mass transit system. The problems are mounting!

[titanhog]

54 minutes ago, smeagolsfree said:

Thanks for getting the link fixed! Looks as if we have gone from the "it" city to the "sh*t" city.  I feel the pain of people trying to buy a home. Now with the compounded factors of inflation it just makes matters worse that were having it hard to begin with. Moving away may be in the cards for a lot of people. Jobs seem to be available no matter where you go, so finding work should not be a problem, but good paying jobs in rural areas is. It is a no-win situation. You can get a lot more housing for your dollar in Detroit, but for me I am not going to move to Detroit nor the state of Michigan. For that matter like many, not above the Ohio river, just because I don't like winter. Where I want to go is out west and the water situation is dire there so that seems to be off the table now.

Where I live a house across the street that was sell for 300k last year was for sale for 359 and they had an open house and were offered 401 that day. Two other homes in the neighborhood went for 415k & 475k. I am at a loss for words needless to say.

Nashville plus the State will have to wake up when it comes to the traffic situation at some point whether it is fixing the interstate system or adding a mass transit system. The problems are mounting!

All of this is going to drive more sprawl in the region, as well.  People who could afford Murfreesboro or Lebanon and drive into work may have to look even further out.  I’m hearing some people are buying and driving in to Nashville from places like Manchester…Lewisburg…Cookeville…etc.

[VSRJ]

How people can spend that much time in their cars each day is incomprehensible to me, but to each their own. I'd rather live frugally and live closer to work than save money but have an hour (or more) commute one-way. And at that point, the cost of gas has to be taken into account. 

But knowing that I want to live within the city limits, I've completely shelved the idea of owning a home anytime soon (I'm 30, so hopefully I have some time).

[Baronakim]

2 hours ago, titanhog said:

All of this is going to drive more sprawl in the region, as well.  People who could afford Murfreesboro or Lebanon and drive into work may have to look even further out.  I’m hearing some people are buying and driving in to Nashville from places like Manchester…Lewisburg…Cookeville…etc.

I have been  driving into work in the Nashville  Gulch from near Lewisburg for the past 25 years.  What else is new?  I f anyone hasn't been down in Maury County recently, the influx of new residents is HUGE.  Besides the Nashville affordability issue, the massive GM plant expansion  is causing a real estate boom.  Spring Hill is exploding with big new housing complexes and the new I 65 Diverging Diamond exit has started construction as well as massive developments at old exit 46.  I think Maury is set to be as booming as Rutherford has been this decade.

Edited June 2, 2022 by Baronakim

[titanhog]

4 hours ago, Baronakim said:

I have been  driving into work in the Nashville  Gulch from near Lewisburg for the past 25 years.  What else is new?  I f anyone hasn't been down in Maury County recently, the influx of new residents is HUGE.  Besides the Nashville affordability issue, the massive GM plant expansion  is causing a real estate boom.  Spring Hill is exploding with big new housing complexes and the new I 65 Diverging Diamond exit has started construction as well as massive developments at old exit 46.  I think Maury is set to be as booming as Rutherford has been this decade.

Yep.   That’s what I’m hearing.  As Nashville grows and becomes more expensive, sprawl explodes.  The exact opposite of what most want.

[bnacincy]

Northwest Davidson County would be a great location for a boom in affordable housing but the topography is very limiting-unless some enterprising developers could find a way to work the problem to their advantage.

[smeagolsfree]

9 hours ago, bnacincy said:

Northwest Davidson County would be a great location for a boom in affordable housing but the topography is very limiting-unless some enterprising developers could find a way to work the problem to their advantage.

You have to flatten out all of the hills and then convince the folks that live there to allow any kind of development. I don't think either one will happen. There is one 300-acre parcel right off of Briley at Ashland City Hwy the owners have been trying to get rezoned from agriculture A2 to anything other than that and Metro is not considering a change. The owners can't even sale the property and it is pretty much useless as farmland as well because of the terrain. The area neighbors are always raising a stink about any development even though this is right across from the landfill and several other industrial sites. This is Metro at its best!

[markhollin]

ApartmentData.com reports Nashville has a 93.4% occupancy rate — a sign that the sector is holding steady and Music City is inundated with new residents looking to rent. Over the last 12 months, rental rates have increased 17.2%, and there are 9,684 units under construction and 30,656 units proposed. 

More at NBJ here:

https://www.bizjournals.com/nashville/news/2022/06/03/deal-dash-metrocenter-near-record-sale.html

[Armacing]

On 6/2/2022 at 12:54 PM, smeagolsfree said:

You can get a lot more housing for your dollar in Detroit, but for me I am not going to move to Detroit nor the state of Michigan. For that matter like many, not above the Ohio river, just because I don't like winter. Where I want to go is out west and the water situation is dire there so that seems to be off the table now.

How about Memphis?  That's kind of "out west" and still very affordable, and still within TN.  If you want to move to the Southwest you just have to know its a desert and water will always be a problem with or without the drought.  If you know that going into it, I think you could still enjoy living there.  Las Vegas was already the driest major city before the drought, so it's nothing new.  To me, East Tennessee appears to be the "undiscovered country" that is still cheap but has a lot to offer in terms of outdoor activities.

22 hours ago, VSRJ said:

But knowing that I want to live within the city limits, I've completely shelved the idea of owning a home anytime soon (I'm 30, so hopefully I have some time).

I think you should re-consider this strategy because you are missing out on the single biggest hedge against inflation by not owning a home.  By a being a renter, not only will your rent go up with inflation (meaing you will save less unless your salary beats inflation), but you're missing out on capital appreciation.  If I were you, I would buy a house no matter how far out you have to go to afford it.  Even if you don't live there and just rent it out, you will still gain that appreciation over the long term.

18 hours ago, titanhog said:

Yep.   That’s what I’m hearing.  As Nashville grows and becomes more expensive, sprawl explodes.  The exact opposite of what most want.

It's Atlanta 2.0     ... Just as many on this board have predicted.

7 hours ago, smeagolsfree said:

 This is Metro at its best!

100% Agree.  Nashville has not changed their zoning fast enough to allow the types of high-density construction necessary to keep housing affordable in Davidson Co.  And the NIMBY's are more powerful in Davidson Co versus the rural counties.

[smeagolsfree]

The problem with anything is finding the right job. When you move to some of these markets you will find the wages are not what they are here so it is a catch 22 unless you work remotely or are retired.

[Rick Dalton]

I’m sorry but Memphis is not “out west”. Memphis is truly southern. Flat and hot.

[Armacing]

2 hours ago, natethegreat said:

I’m sorry but Memphis is not “out west”. Memphis is truly southern. Flat and hot.

I was half-joking with that answer.