Knoxville, Tennessee, is a vibrant city with a thriving housing market. The Knoxville housing market showcases resilience and vigor. The surge in median listing home prices, coupled with a seller's market dominance and a competitive sale-to-list price ratio, paints a vibrant picture of Knoxville's housing landscape.
How is the Knoxville Housing Market Doing Currently?
Knoxville, TN asserts itself as a seller's market in December 2023, signifying a scenario where demand outstrips the available housing supply. With more eager buyers than homes on the market, sellers hold the advantage in negotiations, shaping the real estate landscape in the city.
Median Listing Home Price Surge
According to Realtor.com, in December 2023, the median listing home price in Knoxville, TN soared to an impressive $439.2K, marking a substantial 10.1% year-over-year increase. This surge reflects the robust demand and attractiveness of the Knoxville housing market.
Sale-to-List Price Ratio
The sale-to-list price ratio stood at an intriguing 99.01%. This indicates that, on average, homes in Knoxville were sold for a mere 0.99% below the asking price in December 2023, highlighting a competitive market where buyers and sellers find a delicate balance.
Median Days on Market
One crucial metric influencing the Knoxville housing market is the median days on market. Homes in Knoxville, TN, typically sell after spending an average of 55 days on the market. This metric reveals a fascinating trend, indicating a slight increase since last month but maintaining stability compared to the previous year.
Knoxville Housing Market Pulse Survey
The real estate landscape in Knoxville, Tennessee, is subject to the ebbs and flows of market dynamics, and staying informed about these changes is crucial for industry professionals and potential buyers and sellers. The Q2 2023 Market Pulse Survey, conducted by the Knoxville Area Association of REALTORS®, sheds light on key findings and trends that are shaping the local real estate market.
The survey offers a comprehensive look at the current state of the Knoxville real estate market, and here are some of the key findings:
- Buyer Traffic: Buyer traffic saw a slight decline in the second quarter, with only 12% of respondents reporting more buyer traffic compared to the previous year. This figure was down from 17% in the previous quarter. On the other hand, seller traffic decreased further, with only 11% of respondents noting an increase compared to the previous year.
- Expectations: REALTORS® anticipate relatively stable buyer traffic in the coming three months, with 40% expecting lower-than-usual buyer activity. Expectations regarding seller traffic were more varied, with 39% anticipating it to remain the same and 42% expecting it to decrease.
- Offer Activity: Respondents reported an average of 3.0 offers on homes sold in Q2 2023, showing an increase from the previous quarter's 2.2 offers.
- Home Sales Outlook: A positive sentiment regarding home sales emerged, with 33% of REALTORS® expecting an increase in home sales over the next year, up from 28% in the previous quarter. Additionally, 42% anticipate sales to remain steady, while 26% expect a decrease.
- Home Prices: Expectations surrounding home prices remained robust, as 83% of respondents anticipate either stable or rising home prices over the next year, with 64% expecting an increase.
- All-Cash Sales: In Q1 2023, all-cash sales constituted 30% of all home sales, showing a decrease from 37% in the previous quarter but an increase from 29% a year ago.
- Appraisal Concerns: REALTORS® reported fewer issues with appraisals, with only 9% of homes sold in the past three months having an appraised value lower than the purchase price, down from 20% a year ago.
- Contingency Waivers: Buyers displayed more confidence, with 48% waiving at least one contingency in their purchase contract over the past three months, down from 62% a year ago.
The survey's findings highlight the evolving nature of the Knoxville housing market. Economic uncertainties and mortgage rate fluctuations have impacted both buyers and sellers, but the overall outlook is cautiously optimistic. Notably, a majority of local REALTORS® expect home prices to rise in the coming year, indicating a significant shift in sentiment from the previous year.
As the Knoxville real estate market continues to evolve, staying informed about these trends and insights can help individuals make informed decisions in this dynamic industry.
“The housing market is still facing headwinds as economic uncertainty and higher mortgage rates have slowed buyer and seller activity alike,” said Hancen Sale, Government Affairs and Policy Director at East Tennessee REALTORS®. “However, our latest survey suggests Realtors® remain cautiously optimistic, and their outlook on the housing market is improving, especially as it relates to prices.”
Knoxville Housing Market Forecast 2024
According to the forecast by Knoxville Area Association of REALTORS®, after a prolonged downturn spanning nearly two years, East Tennessee's housing market is poised for a rebound in 2024. The forecast paints a picture of a market on the brink of recovery. The anticipated rebound in home sales, coupled with continued upward pressure on prices due to a housing shortage, reflects a resilient real estate landscape.
Home Price Growth and Market Forces
Home prices in the Knoxville metropolitan area have experienced noteworthy growth, rising by 11.3% in the third quarter of 2023, according to the FHFA House Price Index (HPI). Despite the deceleration in price growth, the market remains above the historic average. The anticipated rebound in home sales in 2024 is attributed to the expected decline in mortgage rates and improving affordability conditions, facilitating the return of buyers previously priced out of the market. Additionally, long-term market forces such as favorable demographic trends, migration, and changing household composition are expected to stimulate further market activity.
Anticipated Rebound in Home Sales
After facing a downturn with a 9% and 15% year-over-year decrease in home sales in 2022 and 2023, respectively, the East Tennessee housing market is set to rebound in 2024. Forecasts indicate a substantial 11.1% increase in total home sales, bringing the market back to pre-pandemic levels. This resurgence is fueled by the improved affordability conditions and the decline in mortgage rates, offering prospective buyers a renewed opportunity to enter the local real estate market.
Upward Pressure on Home Prices
While affordability conditions remain near record lows, a chronic undersupply of housing persists, exerting upward pressure on prices. Home prices are anticipated to increase by 3.6% in 2024, driven by the ongoing supply-demand imbalance. The market dynamics suggest that despite the rebound in home sales, the shortage of available housing will continue to support price growth in the East Tennessee region.
Deceleration in Rent Growth
Rent growth, after experiencing double-digit increases in 2022, slowed considerably in the latter half of 2023. In the Knoxville metro area, rents rose by 3.9% in the fourth quarter of 2023. The deceleration is expected to persist, with apartment rent growth forecasted to slow to an average of 3.1% in 2024. This shift in the rental market reflects a more stabilized and sustainable growth pattern compared to the previous years.
Apartment Occupancy Rates
Knoxville's apartment occupancy rate, despite experiencing a decline throughout 2023, remains among the highest in the country. The rate is expected to continue falling as new units become available, with the forecast projecting an average occupancy rate of 96.4% in 2024. This indicates a dynamic rental market with ongoing demand even as new housing units are introduced.
As the region navigates changing market forces and economic conditions, stakeholders in East Tennessee can expect a dynamic and evolving real estate market in the coming year.
Should You Invest In Knoxville Real Estate Market?
There are several reasons why investing in Knoxville's real estate market could be a good choice:
- Strong appreciation rates: Knoxville has experienced significant home appreciation rates in the last ten years, with an average annual appreciation rate of 8.26%, putting Knoxville in the top 20% nationally for real estate appreciation.
- Diversified economy: Knoxville's economy is diverse, with several industries such as healthcare, education, and technology contributing to its growth. This diversity helps to stabilize the housing market and makes it less vulnerable to economic downturns. The region is also home to the Oak Ridge National Laboratory, which is a major research facility and employer in the area. This mix of industries helps to create a stable economic environment, which can provide opportunities for real estate investors.
- Affordable housing market: Compared to other metropolitan areas, Knoxville's housing market is relatively affordable. This makes it an attractive option for investors looking for affordable entry points.
- Strong rental market: Knoxville has a strong rental market, with a vacancy rate that is consistently lower than the national average. This means that investors have a good chance of finding tenants quickly and maintaining a steady rental income. The Knoxville military and retiree market can be another potential factor to consider for real estate investment, especially for rental properties. Knoxville is home to several military bases and has a large retiree population, which can create a steady demand for rental properties. This can provide investors with a reliable and stable tenant pool, which can help reduce vacancy rates and ensure consistent rental income.
- Landlord-friendly environment: Knoxville is known to have a landlord-friendly environment, with laws that are generally favorable to landlords. For example, landlords have the right to evict tenants for non-payment of rent, and the eviction process is generally considered to be quick and efficient. In addition, Tennessee has no state income tax, which can be beneficial for real estate investors looking to maximize their profits.
However, there are also some potential drawbacks to investing in Knoxville's real estate market:
- Slow population growth: While Knoxville has a diversified economy, its population growth has been slow in recent years. Slower population growth could limit the potential for housing demand, which could impact the appreciation rates in the long term.
- Limited job growth: Although Knoxville's economy is diverse, job growth has been slower than the national average in recent years. This could limit the demand for housing in the long term, which could impact appreciation rates.
- Climate risks: Knoxville is located in an area prone to natural disasters such as tornadoes and floods. These climate risks could impact the value of the real estate in the area and lead to higher insurance costs for investors.
Overall, investing in Knoxville's real estate market could be a good option for investors looking for affordable entry points and strong appreciation rates. However, investors should also consider the potential drawbacks, such as slow population and job growth, and climate risks, before making a decision.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market area, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
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