Affordable Memphis: The Next Hot Housing Market for Millennials?

Highlights from this report:

  • Memphis is one of the most affordable housing markets for first-time buyers.
  • That’s based on a 2019 report from the title insurance company First American.
  • Millennial first-time buyers, in particular, will appreciate the city’s low prices.
  • As of July 2019, the median sales price in Memphis was around $135,000.

Beale Street in Memphis, TN
Beale Street in Memphis, TN. Photo by Bruce Emmerling.

The real estate market in Memphis, Tennessee is hot right now, and affordability has a lot to do with that.

In many cities across the U.S., home prices have risen to the point where a person with an average income cannot afford to buy a median-priced home. Some residents are fleeing these high-cost areas and seeking affordable housing elsewhere, in places like Memphis.

Affordable Cities for Millennial First-Time Buyers

According to a recent report from the Santa Ana-based title insurance company First American, Memphis is one of the best cities for millennial first-time home buyers in 2019. Memphis is just one of several major cities across the U.S. that offer affordable housing options for buyers with limited funds.

To quote the First American report:

“Our analysis shows that cities such as Memphis, Oklahoma City, and Pittsburgh are areas where millennial first-time home buyers will have best outlook for homeownership.”

The company analyzed housing markets across the country, with an emphasis on cost. Specifically, they wanted to find cities with a high percentage of affordable homes for millennials and other first-time home buyers. (Affordability in this context assumes that one-third of the home buyer’s pre-tax income is used for the mortgage payments.)

Based on that analysis, here are the top-10 cities with the largest supply of affordable homes for first-time buyers:

  1. Memphis, Tenn. : 71 percent
  2. Oklahoma City: 71 percent
  3. Pittsburgh: 69 percent
  4. Atlanta: 66 percent
  5. Cincinnati: 66 percent
  6. Kansas City, Mo.: 65 percent
  7. Tampa, Fla.: 65 percent
  8. Detroit: 62 percent
  9. St. Louis: 61 percent
  10. Chicago: 60 percent

Related: 3 trends affecting first-time buyers

Memphis Housing Market Is Hot in 2019

The Memphis housing market is hot in 2019, partly due to a shortage of properties for sale. This in turn is boosting home prices across the metro area.

Four or five years ago, the city had a six-month supply of homes for sale. That’s a fairly “balanced” housing market, meaning that it doesn’t lean too heavily toward buyers or sellers. But inventory levels have dropped quite a bit since then.

As of May 2019, the Memphis real estate market had about a two-and-a-half-month supply of homes for sale. That means it tends to favors sellers over buyers, at least from an inventory standpoint. This increases competition for those planning to buy a home.

Real estate investors have a lot to do with the tight inventory conditions in the Memphis area. According to a report published recently by the housing analytics company CoreLogic, Memphis was one of the top real estate markets for investor purchases in 2018. (Philadelphia and Detroit rounded out the top three, according to CoreLogic.)

Investors favor these cities because home prices are still low enough for them to profit from — either by renting the properties out, or selling them for a higher price down the road.

Another important metric has changed over the past few years, and it too sheds light on the current real estate market conditions in Memphis. The median number of “days on market” (the midpoint for how long it takes to sell a home) has dropped significantly over the past five years or so. In short, this means that homes are selling faster today, in 2019, compared to a few years ago. 

Both of these indicators — declining inventory and faster home sales — point to a hot housing market in Memphis with strong competition among buyers.

Home-Price Growth Appears to Be Slowing

Despite the strong demand for housing in the Memphis area, home-price growth has slowed down over the past couple of years. This is a trend we are seeing in many cities across the U.S., as of summer 2019.

In July, for example, the real estate research team at Zillow wrote the following: “Memphis home values have gone up 4.8% over the past year and Zillow predicts they will rise 2.1% within the next year.”

Granted, that’s a just forecast for the next 12 months. And housing-related forecasts are the equivalent of an educated guess. But other indicators show the same thing. House values within the Memphis housing market — and the nation as a whole — are rising at a slower pace today than in previous years.

Key takeaways from this article:

  • Though it shows signs of cooling in 2019, the Memphis housing market is still very competitive.
  • The city’s low home prices and unique lifestyle attract home buyers from other, more costly cities across the nation.
  • From a cost standpoint, Memphis is one of the most buyer-friendly big-city housing markets in the U.S. as of summer 2019.
  • The city is especially appealing to millennial first-time buyers who are trying to minimize their monthly housing costs.

Disclaimer: This article includes a home-price forecast for the Memphis real estate market. Those predictions were provided by a third-party source not associated with the Home Buying Institute. The publishers of this website make no predictions or assertions about future housing conditions.