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Market Pulse
December 2023
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Housing affordability continued to wane in 2023. According to a new report from Redfin, only 10.7% of homes listed for sale in 2023 were affordable to a median-income family. By comparison, 22.7% of homes were affordable to the same family in 2022.
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Apartment rent growth continued to moderate in November, with rents across the Knoxville MSA increasing by 3.72% from the previous year compared to 0.16% nationally.
- The average rent for a 3-BR single-family home in Knoxville was $2,235 in Q3 2023, up 3% from a year ago, according to a report from Rentometer.com.
- According to a new poll released by East Tennessee REALTORS®, 64% of Knoxville city voters support Mayor Indya Kincannon's plan to amend zoning laws to allow for more missing middle housing like duplexes, triplexes, and small apartment complexes.
- How much do you know about homelessness in America? Take this quiz by the Urban Institute and find out how much you know about what research shows is the causes of and solutions to one of the nation's most pressing challenges.
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Home Sales Report
November 2023
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East Tennessee home sales declined — down 1.2% from the previous month and 5.0% from a year ago. Home sales are down 15.3% YTD.
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The median home sales price was $346,000 — up 10.8% from the previous year.
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Total housing inventory increased from the previous year – up 3.5% from a year ago.
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Half of the homes sold were under contract in 15 days or less, up from 12 days the previous month and 14 days a year ago.
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25% of homes sold for more than the asking price, down from 26% the previous month, with 13% selling for at least $10,000 over asking and 4.6% selling for at least $25,000 over asking.
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The Sale-to-List Price Ratio declined to 97.8% – down from 98.6% last month.
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New construction represented 13.7% of total home sales.
East Tennessee REALTORS® reports home sales data using a seasonally adjusted annualized rate (SAAR), a statistical measure of home sales that takes into account typical seasonal fluctuations in the real estate market, such as increased home sales during the spring and summer months, by adjusting the data to provide an annualized rate. This rate represents the projected number of homes that would be sold over a year if the current sales pace were to continue.
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After stalling earlier this year, home price growth across East Tennessee accelerated once again in the third quarter. According to FHFA data, house prices in the Knoxville MSA increased 11.3% over the past year in Q3 2023 – the 4th fastest growth among the top 100 U.S. metros and more than twice the national average of 5.5%. By comparison, Nashville saw home prices fall 0.1% while Memphis experienced nominal growth of 2.0% during the same period.
What's the Outlook? With one month of data still outstanding, home sales across the East Tennessee region are poised to fall approximately 15% in 2023, as higher mortgage rates and home prices have eroded affordability. Although housing market activity remains well below pre-pandemic levels, economic conditions continue to improve and will likely boost home sales in 2024.
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East Tennessee REALTORS® is proud to sponsor ULI Knoxville's upcoming Emerging Trends in Real Estate 2024 breakfast. The program will highlight trends outlined in the Urban Land Institute's highly regarded Emerging Trends in Real Estate® report as well as other local commercial real estate market trends. The keynote speaker is Paul Fiorilla, Director of Research at Yardi Matrix. Fiorilla is a 25-year veteran of the CRE industry and oversees Yardi's research publications including national and metro outlooks. | |
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When: January 11th, 2024, at 7:45 AM
Where: 5138 Lyons View Pike, Knoxville, TN 37919 (Cherokee Country Club)
Charge: $30 for ULI members, $40 for Non-Members Breakfast will be served.
*No charge for CCIM and IREM members who register through their respective organizations.
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To demonstrate these concepts, the simulation features a series of case study “pro formas” - the analyses a developer undertakes to estimate total development costs relative to projected income (e.g., the monthly rents) in order to determine financial feasibility. While in reality no two housing developments are the same, this analysis allows policymakers and housing advocates to see broadly how development math works and how different policy choices impact whether or not new housing gets built. | |
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Nearly Half of Knoxville Voters Report Experiencing Financial Strain Over Housing Costs
Nearly half of Knoxville voters (48%) reported experiencing some degree of financial strain over housing costs, with even higher levels reported among renters (87%) and those under the age of 50 (61%), according to a new American Strategies/East Tennessee REALTORS® poll.
Given the region's focus on retaining college graduates and other young professionals, one data point stands out: More than one-third (34%) of voters aged 18-34 reported housing costs were a significant strain on their budget. And while a majority of voters are uneasy about the prospect of looking for a new place to live, younger voters are especially pessimistic: A stunning 95% of respondents aged 18-34 say that they would have difficulty finding a new home in their price range if they had to move today.
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With housing typically the largest monthly household expense – especially among younger Americans – these polling results reiterate that housing and land use policy must be a central component of any plan to attract and retain workforce talent. Ultimately, investments in housing supply today will be the fuel that propels the dynamism and strength of tomorrow's economy. | |
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ISSUES IN HOUSING:
Housing America's Older Adults
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America’s senior population is in the midst of unprecedented growth, a demographic trend that will have an enduring impact on the country’s housing market and the types of housing options in demand. The growing population of seniors, combined with rising housing costs, has made it increasingly challenging for many to find suitable living arrangements that cater to their unique needs and financial capabilities.
According to the Harvard Joint Center For Housing Studies (JCHS) "Housing America's Older Adults" report released this month, the U.S. population 65 and over soared by 34 percent in the last decade. This trend is even more pronounced in the East Tennessee region, where roughly 1 in 5 residents are aged 65 or older.
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The impact of a growing senior population on housing demand is likely to take many forms, according to Fannie Mae, including more seniors tapping into the equity in their homes to make renovations and improvements that allow them to age in place, or choose to sell their home and move to a more affordable or accessible unit.
Studies also suggest an increasing number of seniors will be living alone. This is likely to drive demand for smaller, affordable homes that accommodate their needs, such as single-level homes, age-friendly designs, and communities with accessible features like no-step entry and hallways wide enough to accommodate wheelchairs.
However, despite the growing need for more accessible and affordable housing options, 70% of the region’s housing stock is comprised of detached single-family homes – which is oftentimes cost-prohibited for seniors living on a fixed income. Moreover, only around 10% of homes nationally are considered aging-ready, meaning the vast majority of the country’s housing stock is not designed to accommodate the challenges that come with aging.
This demographic shift also will affect the rental market, as multifamily property owners may need to consider modifications to attract and retain senior tenants. Such improvements can be especially costly for smaller multifamily buildings and attached units, which research indicates are home to over a third of older renters, highlighting the need for additional government funding to facilitate aging-in-place.
Take a deeper dive into the issue with How to Meet the Housing Needs of Older Adults Aging in Place by the Urban Institute, The Senior Housing Shortfall in Harvard Magazine, and The Future of Aging in Place... Is Moving? from AARP.
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Housing inventory declined across most of the East Tennessee region over the past month, a typical seasonal pattern. As of the end of December, active listings across the region were down 0.9% from the previous year. 8 of the 12 counties covered by the East Tennessee REALTORS® Multiple Listing Service recorded month-over-month declines in available inventory from November to December 2023. | |
Anderson County tops the list of Tennessee's hottest housing markets, according to Realtor.com's Hotness Index. The map is a good visual representation of the old maxim: all real estate is local. Two of the hottest housing markets in Tennessee (Anderson and Knox) are right next door to one of the coldest (Sevier). | | |
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"The latest weakness in existing home sales still reflects the buyer bidding process in most of October when mortgage rates were at a two-decade high before the actual closings in November. A marked turn can be expected as mortgage rates have plunged in recent weeks."
– Lawrence Yun, Chief Economist at NAR
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Heading Into the New Year, Mortgage Rates
Remain on a Downward Trend
Mortgage rates fell dramatically throughout November, a trend which continued into December with rates falling to the lowest level since May. According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed mortgage rate (30Y FRM) averaged 6.61% for the week ending December 28th. By comparison, the 30-year fixed mortgage rate averaged around 6.42% this time last year.
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What's the Outlook? With inflation falling at a gradual pace – edging closer to the Federal Reserve's long-run goal of 2% – mortgage rates have plummeted over the past two months and are poised to decline even further in 2024 if inflation continues its current downward trajectory. | |
According to a new report from Rentometer.com, the average rent price for three-bedroom (3-BR) single-family rentals (SFRs) in Knoxville was $2,235 in Q3 2023 – an increase of 3% from the previous year. By comparison, the average rent for a 3-BR apartment was $1,799 during the same period. | |
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Among the five largest cities in Tennessee, Knoxville had the largest year-over-year rent increase for single-family units at 3% in Q3 2023. Nashville, Memphis, and Chattanooga all saw rents decline during the same period.
The data underscores how the rise in housing costs has been more pronounced in Knoxville relative to its in-state peers. For example, the average rent for a single-family home in Nashville was 23% more expensive than a comparable home in Knoxville in Q3 2022 – yet this price premium fell to 17% by Q3 2023. Similarly, the typical single-family rental in Chattanooga was 7% cheaper than a comparable home in Knoxville in Q3 2022 but, by Q3 2023, rents in Chattanooga were 12% cheaper.
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Stay up-to-date with the most recent information about East Tennessee's housing market. Here's the latest from local media: | |
EAST TENNESSEE REALTORS® CORPORATE ALLIES | |
The Corporate Ally Program (CAP) is an advocacy partnership between corporate entities and East Tennessee Realtors® that gives our real estate business partners the ability to invest corporate dollars to strengthen the industry and support issue campaigns. For more information or to become a Corporate Ally, contact Catrin at catrin@etnrealtors.com. | |
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