Market Pulse

AUGUST 2025

July home sales continued to improve, showing more activation of pent-up demand in the East Tennessee market. Despite a slow start to the year, 2025 sales to date are now up nearly 3% over the same period in 2024.

Some of this movement is likely thanks to slightly lowered interest rates, as the market responds to national news around monetary policy. Affordability improved in July, even before August rates dropped again.

As we write this, the current 30-year fixed mortgage rate of 6.52% is the lowest it has been in 2025. Despite these rate changes being historically small by comparison to recent years (the low in 2024 was 6.08%), the attention on mortgage rates has made the market increasingly responsive.

Notably, price growth has also slowed, with July's median home price of $374,900 the same as July 2024. Continued demand and growth in East Tennessee puts upward pressure on prices even in the slower season, keeping the market steady despite listings remaining on market longer.

Home Sales Report

JULY 2025

East Tennessee home sales in July continued to slowly improve, increasing 7.3% over July 2024.
The median sale price was $374,900, the same as one year ago.
Total housing inventory has increased 31.2% from the previous year.
Half of the homes sold were under contract in 24 days or less, up from 15 days a year ago.
46% of homes sold for the asking price or above, with 21.3% selling for more than the asking price. 8% sold for at least $10,000 over asking and 2.81% sold for at least $25,000 over asking price.
The sale-to-list price ratio increased slightly to 99.3% – up from 98% a year ago.
New construction was 14.4% 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?

July residential sales were healthy following a robust June, indicating that more home buyers are ready to enter the market after a months long period of extreme caution.

A buildup of inventory has helped keep price growth flatter than in recent months, although this effect has primarily boosted affordability in the mid to upper price range of homes from $300-500,000 where the most listings are available. The market still lacks inventory that would be affordable to a family making the median income, and desirable listings that are move-in ready or have premium amenities are moving more quickly than the average.

Consumers still seem more tuned in to national factors than in past years, with upticks in mortgage applications closely following rate drops that would have previously been seen as insignificant.

In one interesting corner of the market, luxury seems to be booming. Partially driven by the rising cost of homes but also by consumer desires for more space and amenities, the top segment of the market has grown by leaps and bounds in the last year. January-July saw consistent double-digit growth in inventory of homes priced between $900,000 and $3 million. Homes in this previously niche price range now represent a surprising 12% of the entire active inventory in East Tennessee.

Changing demographics would indicate that the market does desire these homes, as higher earners continue to move into the region. But so far the slow pace of sales in this price bracket indicates that some of this category growth is likely due to price increases at least equally as much as a response to demand.

Inventory by county

Out of the 12 counties in the East Tennessee REALTORS® footprint, 9 marked measurable increases in active listings over the month of July. Overall, regional inventory increased month-over-month by 7%.

Price surprise: New homes are more affordable than older homes

Housing on the cover of Forbes, again! The national housing affordability challenge is still the topic of the day. At times the progress has felt glacial; growth communities like East Tennessee are struggling to align on meaningful zoning reform, multifamily production has stagnated in the first half of the year and light density reforms are not able to contribute meaningful inventory gains.

In tandem with policy and advocacy efforts, builders in particular have jumped to find innovative solutions to bridge the gap, attracting REALTORS® and their clients.

As the Forbes analysis points out with the help of NAR Chief Dr. Economist Lawrence Yun, new homes have always been a relatively small portion of the market. (ETNR's State of Housing report showed that a historically healthy annual rate of building was around 1% of the number of households in a region). However, in the current market homeowners are holding on to their existing homes longer for various reasons, including the cost of moving, being locked into place by a favorable mortgage or waiting for anticipated market changes - so not enough existing homes are on the market.

Builders are answering the need for more inventory at nearly every price level, but that also creates a paradox - shoppers on a budget typically aren't looking for a new build. A potential homebuyer might assume that shiny fresh countertops and 2025's inflated costs mean extra expense.

A recent story from Realtor Magazine Media highlights new incentives and perks being offered by builders to offset the costs of a new home. Today's buyers are hungry for extras and amenities, and the perceived cost savings often sweeten the deal enough to close.

Perks being offered include everything from upgraded finishes to a free deck, and in one case even a car giveaway.

Corporate builders are also offering mortgage buy-downs, especially on modestly priced "starter homes." Meritage Homes and D.R. Horton have both advertised rates as low as 3.99% for FHA loans.

There's good news on the size of homes as well - builders have noticed that the only way to make a home affordable in many markets is to build it smaller. For the first time since 2007, the average size of new homes in 2025 has dropped to 2,300 square feet. That's still pretty big! But this marks welcome progress.

So, how's East Tennessee doing in comparison?

In July, the median price of new builds sold was $444,537, still above the median existing home price of $360,000. But a significant number of new builds are also in the $200-300,000 range, where the market has high demand.

Our builders have begun offering many incentives to homebuyers, and are answering the call for smaller homes as well: The average size of homes sold in East Tennessee in July dropped to a low for the year of 1,770 square feet.

Why does our market look different than the national numbers?

Here's the context: The often feared "glut" of new homes is not at all a problem here. Thanks to our rapid pace of growth from 2020-2025, thriving job market and economic health, East Tennessee still needs many more homes than are being added to the market.

Realtor Magazine Media

Forbes

Commercial Spotlight: Demand weakens, East TN outperforms

For the first half of the year, national reports have shown that both industrial and retail demand have weakened slightly in line with a soft jobs report and reductions in active workforce. Retail bounced back slightly in Q2, while office space nationally saw declines in leasing as companies attempt to navigate changing circumstances amid fears of further inflation.

Particularly in the industrial sector, overproduction in the post pandemic environment led to softer demand. The national vacancy rate for industrial properties at the end of Q2 was 7.4%, nearly the highest in a decade.

By comparison, East Tennessee's industrial property market continues to outperform. Knoxville is an interesting case study, with several massive industrial projects being realized in late 2024 and early 2025 and new sites in development. The market held steady with a 4.4% vacancy rate, unchanged from Q2 2024. A combination of aggressive corporate recruiting and local business growth especially in manufacturing have helped bolster demand.

Retail in the region has also stayed steady, virtually unchanged from 2024 with a very slight 0.2% increase in rent and a slight decrease in vacancies.

New office starts have dropped nationally and locally, an intuitive update based on uncertainty in the market. The major trends of remote work and the subsequent return to office seem to have stabilized, and vacancy is expected to trend down. Still, the local market has outperformed the national outlook especially in prime Class A office space, where the national vacancy rate topped out at 20.5% in Q2 and Knoxville dropped slightly to 8.2%.

Read NAR's take on commercial trends here.

Mortgage Rate Update

According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed mortgage rate (30Y FRM) dropped from June to 6.56% as of the week ending July 24.

At the Federal Reserve conference on August 22, rates dropped almost immediately after Fed Chair Powell's remarks anticipating potential cuts in September.

Compared to 6.35% one year ago, this is a relatively subtle drop, but near-constant news coverage and focus have kept mortgage rates in the forefront of the national economic conversation.

Experts have remarked that the expectation for a September drop is baked into expectations at this point, and the consensus is clear that consumers shouldn't expect a dramatic change like those of 2021-2022.

Mortgage Rates Deep Dive: Check out the monthly forecast and commentary from the Mortgage Bankers Association.

Mortgage Bankers Association - August Forecast