Market Pulse - December 2025

Market Pulse

DECEMBER 2025

As we review 2025 and look ahead to 2026, the East Tennessee real estate market continues to recover. The market has stabilized nationally and locally, and the years of skyrocketing home prices are behind us.

Single-family home sales this fall have been especially reactive to mortgage rates, and as of this writing the weekly average 30-year fixed rate has reached a 2 month low of 6.18%. Combined with recent wage growth in some sectors, this is expected to boost home buying power going into the new year.

This month, the National Association of REALTORS® announced a 3-year high in pending sales for November. At the same time, pending sales in the East Tennessee REALTORS® MLS were up nearly 30% over November 2024.

The national economic outlook may be mixed with on jobs and inflation concerns, but this backdrop has put a spotlight on the need for rates and monetary policy to boost financial health - potential good news for housing.

Continued interest in the East Tennessee region, stable assessments and a strong sale to list price ratio indicate that local home values will hold up in 2026.

Home Sales Report

NOVEMBER 2025

East Tennessee home sales rose 2.6% from November 2024.
The median sale price was $365,000 — down 2.6% from the previous year.
Total housing inventory has increased 16.2% from the previous year.
Half of the homes sold were under contract in 35 days or less, up from 21 days a year ago.
38.7% of homes sold for the asking price or above, with 16.8% selling for more than the asking price. 5.7% sold for at least $10,000 over asking and 2.7% sold for at least $25,000 over asking price.
The sale-to-list price ratio held steady at 98.5% – up from 96.8% a year ago.
New construction rose to 13.6% 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?

With one month of data left to report in 2025, the year has been much more stable than 2024 and the market is stabilizing as predicted, even if sales have been flat. While the typical spring "busy season" did not materialize due to national economic concerns weighing on consumers, East Tennessee did see a gentle rally in the fall months as mortgage rates decreased.

Overall, the market is in an ideal state to see a strong year of sales in 2026. Post-pandemic home price appreciation spikes are over, and the median home sale price is down from last year. We know home values in our region will hold steady: Over 98% of homes are assessing at or above purchase price, the sale to list ratio is strong at 99% and migration into the area continues to raise demand.

Progress has also been made on the supply side. Inventory has finally surpassed pre-pandemic levels, and sellers have eagerly returned in 2025. However, supply remains far behind demand. In particular, there is still a noticeable gap in homes for sale in the range affordable to the area median income, around $200,000-$350,000.

As our region continues to grow and open lots are scarce in populous counties, we can preserve regional character, improve affordability and maintain a strong housing market by turning our focus to building upward instead of spreading out.

Inventory by county

Out of the 12 counties in the East Tennessee REALTORS® footprint, 5 marked measurable increases in active listings over the month of October. Overall, regional inventory increased month-over-month by 1%.

UT reports slower but steady growth for Tennessee economy, population

In the 2026 edition of the Economic Report to the Governor from the Boyd Center for Business and Economic Research at the University of Tennessee, researchers highlight a healthy state economy that is growing, if more slowly than recent years.

While the state continued to outperform the nation on most economic measures including GDP and jobs, that gap is predicted to narrow slightly as national economic trends affect all states.

Tennessee's GDP grew 1.7% this year, down slightly from a more robust 2.7% last year and 3.2% in 2023. UT's report predicts that growth will rebound to 2% in 2026, and continue to grow to 2.5% in 2027.

More crucial to housing, population growth has slowed significantly to a much more typical rate following the post-pandemic migration boom. In 2024 the state added almost 80,000 new residents, about a 1.1% growth rate that still outpaced the national population increase of 1%. Researchers expect this to remain steady for the next 2-3 years. While an exact date is not estimated, the 9-county Knoxville metropolitan statistical area is expected to reach the milestone of 1 million residents during this same period.

A welcome positive update, more than one third of the new residents were considered "prime working age," or between 25-54 years old. The largest portion of movers was between the ages of 25-39 and the second largest were 18-24. This is a promising reversal of the past few years, where the retiree population growth outpaced addition of working population.

The researchers also pointed out an interesting note on those moving to the state. While we often look at the population boom of 2020-2025 in terms of individual city originations (Los Angeles, Atlanta), the report would suggest that headlines might have placed unfair blame on the weight of new residents from the West and Northeast regions of the country.

Overwhelmingly, new residents in Tennessee between 2010-2023 were from other Southern states.

Read the full 2026 Economic Report to the Governor

National forecasts are mixed on housing, mortgage rates

The 2026 forecasts are rolling in, and this year predictions hinge on a variety of unpredictable economic outcomes. Major forecasters are much more varied than last year, but the one thing most agree on is that we could see positive home sales growth if mortgage rates stay below ~6.5%. The global outlook and economic and monetary policy decisions over the next quarter will weigh on consumer spending power at home.

The National Association of REALTORS® (NAR) predicted a 14% surge in existing home sales (excluding new construction) in 2026, mainly dependent on the 30-year fixed mortgage rates lowering further and staying close to 6%.

Notably, NAR's mortgage forecast tightly mirrors those of financial market forecasters, but factors in more regionality for home sales which results in a higher increase in existing home sales.

Most forecasters agree that the market is split into two sections: Higher income consumers will be less rate-sensitive and more resilient, and middle to lower-range income consumers will depend on affordability to enter the market.

There is still a section of "lock-in effect" consumers who have been unable to take advantage of gained equity to exit their mortgages, although forecasters agree widely that this group will shrink further in 2026.

The nearly unanimous good news is that price appreciation is forecasted to slow.

2026 National Housing Market Forecasts

FORECAST

HOME PRICE GROWTH

MORTGAGE RATE

HOME SALES

NAR	+ 4%	6.0%	+14%
Realtor.com	+ 2.2%	6.3%	+ 1.7%
HousingWire	- 0.62%	5.75 - 6.75%	+ 5.5%
Fannie Mae	+ 1.3%	6.0%	+ 7%
MBA	+ 1%	6.0 - 6.5%	+ 6.5%
Redfin	+ 1%	6.3%	+ 3%

Home buyer momentum building, especially in Southeast

November showed more than 3% month over month increases in pending sales, in contrast to the normal seasonal slump.

The Pending Home Sales Index has become one of the most important tools to forecast home sales in the short term, in this year's unpredictable market. NAR's research team broke down expectations by region, showing the highest index in the Southeast. Read the article here.

“The data shows the strongest performance of the year after accounting for seasonal factors, and the best performance in nearly three years, dating back to February 2023." – Dr. Lawrence Yun, NAR Chief Economist

Mortgage Rate Update

According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed mortgage rate (30Y FRM) reached a new 2-month low of 6.18% as of the week ending December 24. This rate is down 0.67 points from one year ago at 6.85%.

Rates have remained consistently low and continued to inch downward since mid-September, opening up a sliver of new affordability for potential homebuyers.

Interpreting rates and their impact on consumer actions has become increasingly complicated this year; reactions vary by income bracket to an unusually high level of scrutiny and coverage of mortgage rate updates.

For example, anecdotal accounts indicate that consumers who could have already afforded a home at last month's rate are the most likely to be influenced to purchase by news of better rates. These behaviors skew traditional measures of real affordability, and purchase increases seem to land 2-3 weeks post rate drop - often when the rate has gone back up.

MBA is forecasting modest growth in mortgage applications next year, but that doesn't necessarily mean modest sales; cash purchases remain at an all time high according to NAR.

Consumers on the lower to middle end of the income spectrum will enjoy better affordability in 2026, but are also grappling with realities like a softening job market and inflation of everyday goods. These contending forces are expected to keep loan applications relatively steady.