Nashville home prices will keep rising in 2022 as buyers continue to compete for a limited number of homes for sale, Greater Nashville Realtors president Steve Jolly predicted.

In 2021, the median sales price of a Nashville home rose 22.4 percent from $339,000 to $414,900. Jolly said he has seen various forecasts predicting home value increases in 2022 ranging from 6 percent to upwards of 20 percent.

Limited supply was the primary driver of rising home prices, alongside robust demand in 2021, he said.

“The scale of the problem is so large,” Jolly said. “We need affordable [housing], we need market-rate, we need single-family, we need multifamily.”

Construction of new housing in the past 20 years fell 5.5 million units short of long-term historical levels, according to a new National Association of Realtors report. U.S. builders added 1.23 million new housing units, on average, each year from 2001 to 2020. That figure is down from an annual average of 1.5 million new units from 1968 to 2000. The 5.5 million-unit deficit includes about 2 million single family homes, 1.1 million units in buildings with two-to-four units and 2.4 million units in buildings of at least five units.

Based on the current rate, NAR’s chief economist Lawrence Yun said, it could take nearly a decade before supply and demand balance out. Jolly fears it could take even longer in Nashville due to the influx of out-of-state residents flocking here.

Over the past two-and-a-half years, the Tennessee Department of Economic and Community Development has recruited 25 California-based companies to either relocate to Tennessee or expand their footprint here. The projects represent 3,400 new jobs and an investment of $1.2 billion in the state, according to the state.

Jolly added that rising interest rates will also continue to put pressure on the local housing market and box out first-time homebuyers. He said that a 1-percent increase in interest rates reduces buying power by 11 percent. For example, if a buyer is approved to purchase a $400,000 home with interest rates at 3 percent, but interest rates rise to 4 percent, the approved purchase price drops to $356,000.

“If you plan to buy a home in the near future, it’s imperative that you start now because it’s only going to become more expensive in 2022,” Jolly said.