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More positive market signs continue to emerge heading into Q2, with pending sales and inventory increasing steadily since the beginning of the year. Sales jumped 12% in March over February, a seasonally expected trend, but were still slightly down 3% year-over-year. The local market has closely reflected the national outlook and contracted economy; while sellers are becoming more enthusiastic to enter the market, buyers are holding onto their pocketbooks and show hesitation to spend.
Fluctuating mortgage rates have also affected sales, with some positive momentum as rates dropped briefly that gave a preview of momentum to come, and indicating that buyers are even more sensitive than usual to changes. However, the overall effect has been relatively flat and our survey responses from local REALTORS® would suggest that consumer confidence is more of a stumbling block than mortgage rates.
The National Association of REALTORS® (NAR) reported that national pending sales jumped 6.2% in March, the biggest month over month increase since 2023. This should indicate a coming buildup of buyers... and the South showed the best results.
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Market Pulse Survey
Q1 2025 Results
Responses from the most recent East Tennessee REALTORS® Market Pulse Survey show that despite a slow start to the year, local REALTOR® confidence is steady and indicates healthier sales and optimism over 2024.
- Buyer and seller traffic has increased in 2025. 38% of respondents reported seeing more seller traffic than this time last year, compared to just 20% in Q1 2024. Buyer traffic also increased with 25% of respondents reporting more seller traffic than this time last year, compared to 21%.
- REALTORS® expectations about buyer traffic over the next three months remained relatively even, but they expect more sellers to bring inventory to the market. Nearly half of respondents expect more seller traffic than 2024, and another 40% expect seller traffic to stay the same. 33% of respondents felt buyer traffic should increase in Q2 and 40% expect it to stay the same.
- 42% of REALTORS® expect home sales to increase over the next year.
- 60% of REALTORS® expect home prices to continue to rise over the next year, with 19% expecting prices to remain the same.
- Favorable sales markers have improved over 2024, with metrics such as on-time closings, respondents working with 3+ serious clients and listed properties per REALTOR® all increasing.
- Open-format responses about customer feedback indicate that concerns around the overall economy, possibility of recession and inflation woes are heavily influencing hesitation to buy.
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Home Sales Report
MARCH 2025
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East Tennessee home sales in March jumped 12% from the previous month.
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The median sale price was $375,000 — up 7% from the previous year.
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Total housing inventory has increased 25.6% from the previous year.
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Half of the homes sold were under contract in 35 days or less, up from 21 days a year ago.
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42.5% of homes sold for the asking price or above, with 19.2% selling for more than the asking price. 7.6% sold for at least $10,000 over asking and 2.3% sold for at least $25,000 over asking price.
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The sale-to-list price ratio increased to 97.4% – down from 97.9% a year ago.
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New construction increased to 16.3% of total home sales.
| | East Tennessee REALTORS® reports home sales data using a seasonally adjusted annualized rate (SAAR). This method takes into account seasonal fluctuations in the real estate market, such as increased home sales during the spring and summer, by adjusting the data to provide an annualized rate representing the projected number of homes that would be sold over a year if the current sales pace were to continue. | | What's the outlook? After a slow January and February, March sales jumped up by 12% month-over-month. Overall, Q1 2025 ended at a slight 3% reduction in sales from Q1 2024. Inventory is promising, with 2,797 new listings in March. Pending listings have also climbed steadily since the end of the year, which indicates better months to come; the March volume of 1,878 pending sales is the highest since August 2022. Buyer reluctance, mortgage rates and uncertain national economic conditions will likely still be a headwind in April, but the increase in available inventory is still good news for affordability. | | |
After a flat 2024, rent rises slightly in 2025
For the last two years, rent has remained relatively flat with only small fluctuations thanks to a wealth of apartment units being built across the price scale from affordable to luxury. This stability was a welcome change after steep increases post-pandemic. Rent growth in 2024 was a mere 0.5%, and over the last 12 months was negative, at -0.4%. However, that trend may be changing.
Both Apartment List and RealPage show that rent in East Tennessee increased 0.3% in March and 1.2% in April. Despite nearly 1,500 expected unit completions in 2025, occupancy remains high at 95.4%. The additional demand is likely due to lingering affordability barriers for potential home buyers that keep them in rentals, project delays that have slowed delivery and continued in-migration. Another factor that does affect rent costs is the recently increased costs of multifamily ownership, including insurance and maintenance.
| There is a seasonal aspect to rent as well as home sales; typically rent rises in the spring when demand is high before leveling out toward the end of the year. 2025 is following this pattern so far at a slightly steeper pace than 2024. | | |
REALTOR Magazine: Signs Point to a Coming 'Buildup of Buyers'
NAR released new statistics this week showing that contract signings rose in March, possibly heralding a market recovery after a slow Q1. Pending home sales is a good indicator of future market activity, especially where it deviates from the sales trend line. Pending sales climbed 6.1% in March compared to February, contrasting the 6% drop in March closings. Interestingly, the South fared better than the other national quadrants in several areas including job growth, for-sale inventory and pending sales:
- Northeast: Contract signings in March fell 0.5% from February and are down 3% from a year ago. Median price: $468,000, up 7.7% from one year earlier.
- Midwest: Pending home sales rose about 5% in March, up 1.4% from the previous year. Median price: $302,100, up 3.5% from March 2024.
- South: Contract signings increased about 10% in March, down 0.4% from a year ago. Median price: $360,400, up by 0.6% from a year ago.
- West: Signings increased about 5% compared to the prior month but were still down 2% from a year earlier. Median price: $621,200, up 2.6% from a year earlier.
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“While contract signings are not a guarantee of eventual closings, the solid rise in pending home sales implies a sizable buildup of potential home buyers, fueled by ongoing job growth.”
– Dr. Lawrence Yun, Chief Economist at NAR
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Mortgage rates drop briefly before bouncing back
According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed mortgage rate (30Y FRM) dipped to a 2025 low of 6.63 in early March and again briefly to 6.62 in April, before bouncing back to 6.81 as of the week ending April 24.
The 8 basis point rise has largely been attributed to a sell-off in U.S. Treasury securities, motivated by ongoing uncertainty surrounding national policy changes and trade approach. Fed Chair Jerome Powell has so far resisted making reactive changes, noting that the Fed's primary obligation is to price stability.
Compared to an average of 7.17 this time last year, the slight drop in rates has had a positive effect on an otherwise sluggish first quarter of home sales.
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Case Study: Affordable Overlays
Advocates and REALTOR® associations across the country are working to create innovative solutions that drive affordable housing, understanding that the inventory crisis can't be solved by one tactic alone.
Recently in Savannah, the city council made good use of a popular approach to add an affordable housing overlay district near the middle of the city where greater density is desired. The overlay has a two-part strategy to allow development by loosening restrictions on density if units qualify as affordable (no more than 30% of the median monthly gross income) and incentivizing developers through a "density bonus" that allows exceptions to lot size, floor area and other requirements that traditionally stifle multifamily projects.
This overlay won't create affordable housing by default, but it is a significant step that in combination with other incentives will allow greater density and affordability where it is most supported by infrastructure. While similar projects have passed in Nashville, Spokane WA, Greenville SC and other cities, the Savannah overlay is notable in its application to specific neighborhoods prioritizing historic character. Because of the higher level of housing diversity in pre-1975 neighborhoods before the popularization of single family zoning, developers will have greater options for multi-family units while still being held to zoning, design and walkability standards.
Commentary on the project was broadly supported by the public, with a number of advocates as young as age 24 turning out to plead for more affordable options. Read about this project here.
For more: Check out similar efforts in Spokane, WA, where a multi-year effort coordinated by the local and state REALTOR® associations and supported by NAR grants has yielded concrete results. As an example, Spokane's inventory has increased 32.4% over March 2024, and the median home price has dropped 1.4%.
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