House prices in Memphis rose 9% last year
House prices in the Memphis metropolitan area rose about 9% in the past year, according to Federal Housing Finance Agency data.
The FHFA analyzed sales data for single-family properties with conventional mortgages purchased or securitized by Fannie Mae and Freddie Mac to determine growth rates. Excluded from the FHFA analysis were other kinds of real estate transactions like cash purchases and other loans not backed by the government.
The national average was 5.1%, according to FHFA data.
Only three metro areas across the nation — Boise City, Idaho; Colorado Springs, Colorado; and Orlando, Florida — saw prices rise faster than the Memphis metro area, the federal data showed.
“One thing to worry about long term is if appreciation rates are too high then you start worrying about if that is sustainable growth,” said Alex Bogin, a senior economist with the FHFA. “So 5% is much more sustainable than 8%-9%.”
Still, because Memphis has maintained relatively steady growth in the past, when measured over a longer term against the nine other metro areas to top the list, Memphis’ growth has been moderate.
“One telling stat is looking at the fiveyear cumulative appreciation in the top 10 MSAS (metropolitan statistical areas),” Bogin said. “Looking at that, Memphis has the lowest five-year appreciation among the top 10 MSAS . ... While this past year has been particularly good, it’s not a situation where you’ve had a lot of cumulative increase such that price levels are wildly high.”
Buyers and sellers in Memphis saw the average home price grow from $168,000 to $178,000 year over year, said Kathryn Garland, Memphis Area Association of Realtors (MAAR) president.
MAAR data, which includes all residential real estate transactions in the metro area, showed growth happened at a rate of about 6%.
In the past five years, Memphis’ home prices have grown about 33%, according to FHFA data. The next closest metro area among those that saw the greatest growth last year is Indianapolis, which saw home prices rise 39.5% over the past five years. The others in the top 10 saw prices increase between 40% and 80% in the past five years, Bogin said.
That’s particularly important when measuring affordability, said Will Doerner, a supervisory economist with the FHFA.
While increasing house prices signal positive movement, the national average hovered around 7% before dropping to about 5% during the last two quarters. That drop-off isn’t a negative thing.
“It’s a little bit better to see it not increasing at 6% to 7% because if that’s happening and income is only going up by 3% or 4%, pretty quickly within just a couple years you can start to develop a really big gap between what income growth is looking like and what house price growth is looking like, and that ... can make problems for affordability,” Doerner said.
That means slightly slower growth can leave a little more breathing room for potential homebuyers.
“That’s certainly good to see because as it starts to moderate out, that means that income can kind of catch up with some of the house price growth and it doesn’t get to a level that makes things unaffordable or just unsustainable,” Doerner said.
Even with last year’s spike — fueled largely by a slowdown in homebuilding that is increasing demand for a limited supply of houses and a lack of existing housing going on the market because people are staying in their homes for more years on average — federal and local data suggests the growth in the Memphis metro area is sustainable.