Market Pulse - June 2025

Market Pulse

JUNE 2025

At the halfway point of the year, the housing market continues to slowly normalize. Inventory and pending sales continue to climb, with mortgage originations also ticking up. Sales have yet to follow at a similar pace, lagging behind the typical busy season.

Local realities have closely reflected national trends so far in 2025, supporting the theory that external macro challenges contributed substantially to sluggish home sales. While our region economically outperforms others, we also remain in the top three markets nationally for home price appreciation as of Q1 2025.

The East Tennessee REALTORS® released the 2025 State of Housing report, an annual high-level analysis of housing, economic data and trends intended to help REALTORS®, industry stakeholders, and policymakers better understand what to expect and navigate the evolving market. We dive into takeaways below.

Home Sales Report

MAY 2025

East Tennessee home sales in May improved slightly, up 3.4% from a very slow April but down 4.8% over May 2024.
The median sale price was $370,000 — up 1.3% from the previous year.
Total housing inventory has increased 40.3% from the previous year.
Half of the homes sold were under contract in 19 days or less, up from 13 days a year ago.
44.9% of homes sold for the asking price or above, with 21.4% selling for more than the asking price. 8.4% sold for at least $10,000 over asking and 2.6% sold for at least $25,000 over asking price.
The sale-to-list price ratio held steady at 99% – up from 98.6% a year ago.
New construction decreased again to 12.2% 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?

May home sales recovered slightly from April, although year-over-year sales were nearly 5% lower than May 2024. Inventory levels have continued to trend up, with active listings totaling over 7,000 homes for the first time since 2019. The market has most of the ingredients needed for growth, but consumers are still lacking choices and confidence.

There are a few possible outcomes for the second half of the year. Typically, the busiest season of the year runs from April to June before slowing as potential buyers turn their attention to summer activities. If 2025 follows this same pattern, East Tennessee would end the year at only slight growth over 2024. We feel this is the most likely scenario, and have adjusted our forecast downward from 8.3% annual unit sales growth to 6.1%.

If we were to see a catalyst for affordability, such as the mortgage rate moving to 6.5% or below, it is possible we could see more sales growth in the fall. However, this also depends on having a wider range of inventory than is currently available.

Inventory continues to be skewed toward larger and more expensive homes even as the greatest demand lies in smaller, more affordable homes. As of this writing, 85.7% of all active listings in the East Tennessee REALTORS® MLS are priced over $250,000 - in other words, out of reach for potential buyers making the median annual income of our region. The average sale price of new construction homes sold in May was $448,703.

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 May. Overall, regional inventory increased month-over-month by 6%.

East Tennessee REALTORS® 2025 State of Housing Report outlines signs of market recovery

This year's report highlights positive signs of a gradual housing market recovery, welcome news after several years of extremely tight inventory and rapid price growth after the pandemic.

We are at a tipping point in our region; housing is moving in the right direction, but too slowly. This pace must accelerate to accommodate our growth without losing or displacing working-age residents, especially those in the lower half of our local income range.

If we work together to remove barriers to homeownership and add more types of housing choices, we could dramatically increase housing affordability within the next five years for owners and renters.

Home prices are still increasing, but more slowly.

The median home price of single-family homes increased 6.5% across 2024, down from 11.3% in 2023. We expect this gradual slowing of price growth to continue in 2025, forecasting a more "normal" 2.9% price growth. Property is still in high demand in East Tennessee, with a consistent rate of population growth and constrained inventory, which will continue to put upward pressure on prices and prevent any steep corrections.

Mortgage rates are no longer the biggest deterrent for potential buyers.

From 2020 to now, a large number of sellers held on to existing homes to preserve their incredibly low 2-3% mortgage rates. In 2025, this is largely over. Existing home inventory has finally returned to the market at 2019 levels, indicating that home sellers are now comfortable with trading in their lower rate.

We’re emerging from the inventory crisis; now we have an inventory mismatch.

At the worst point of the crisis in 2022, our entire region had only 614 homes for sale during a year when we added more than 13,000 people. In 2025, we have more than 6,000 homes listed for sale. So why aren't they selling faster?

Data reveals that nearly 60% of potential homebuyers are competing for less than 15% of the inventory due to affordability. When filtered by essential buyer needs like location, the options are even slimmer. While we need more homes for every type of buyer, the biggest need is homes attainable for a low to mid-range household income.

Affordable "starter homes" are the most in-demand type of housing both for income-constrained buyers and a growing demographic of seniors aged 65+, but data shows that new homes being built in East Tennessee are getting bigger and more expensive.

We can take immediate action to help solve the inventory problem and make homes more attainable to residents.

The increasing size and cost of homes is driven by the cost of land and materials, highly restrictive zoning and organized public resistance against any type of housing that is not a traditional single-family detached design.

We can't make land or building materials cheaper. We can remove policy and zoning barriers and educate our community to help encourage the types of housing we need most: homes that are smaller, more affordable and take up less of our rapidly shrinking available space.

With housing advocates, neighborhoods and community leaders, elected officials and policymakers working together, we’ve made progress. Now we must accelerate that progress to preserve what makes our region special and allow our residents, existing and new, to continue to call East Tennessee home.

Access the full report and slides

National State of Housing report mirrors local challenges

The Joint Center for Housing Studies at Harvard University recently published their annual The State of the Nation's Housing report, followed by a publicized panel discussion from some of the nation's leading experts and policymakers in housing and related financial services.

The takeaways were strikingly similar to our local State of Housing report. While East Tennessee is better positioned for economic success than many areas of the country, our challenges with housing inventory, price growth and an imbalance of access are echoed nationally.

Homebuyers are increasingly priced out: Homeowners are finding it increasingly difficult to enter and remain in the homeownership market, not only due to the cost of a home but the surrounding costs of housing including insurance, taxes and maintenance costs.

Home sales drop due to affordability:

The Home prices have increased a cumulative 60% since 2019, and the median home price nationally is now 5x the median household income.

Renter cost burdens have hit a record high, and rents are shifting higher:

Nationally, 50% of renters are cost-burdened for the third year in a row. About 27% are severely cost burdened.

This graphic shows a slowing rate of domestic migration. However, Tennessee is still in the top category with a migration rate of more than 5 people added per 1,000 residents in 2024.

The benefit of similar problems is similar solutions: as a local and regional advocate, East Tennessee REALTORS® collaborates with other associations and policy thought leaders across the country, as well as across industries. The report also included a wealth of insights and options being used creatively that markets can emulate, including builders working to build smaller homes, banks offering mortgage rate buydowns or cities funding local land trusts.

NAR: Slow total home sales, but pending home sales keep building

While national home sales increased only by 0.8% in May, pending home sales showed an 1.8% increase. NAR researchers continue to point to signs of pent-up demand, consumer intent lagging behind even as inventory increases.

“Increasing participation in the housing market will increase the mobility of the workforce and drive economic growth. If mortgage rates decrease in the second half of this year, expect home sales across the country to increase due to strong income growth, healthy inventory, and a record-high number of jobs.” Read the article here.

– Dr. Lawrence Yun, Chief Economist at NAR

Mortgage Rate Update

According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed mortgage rate (30Y FRM) dropped slightly to 6.77% as of the week ending June 26 compared to 6.86% one year ago.

Mortgage rates and the Federal Reserve have been much in the public eye this spring, with housing taking center stage as our industry was identified as one of the main drivers of inflation amidst a particularly contentious political environment. Fed Chair Jerome Powell recently stated again in both a regular release and congressional testimony that they do not yet plan to adjust policy or cut rates, noting "If we make a mistake here, people will pay the cost for a long time."

This was followed by comments from the presidential administration, hinting that they intend to speed up selection of the next Fed Chair while Powell is still in the role. Some economic commentaries predict that communication from the new chair might influence the market without rate cuts, pushing bond traders to lower the 10-year yield in expectation of this more aggressive policy, which then would put downward pressure on mortgage rates. Others believe that in the short term, this might drive the Fed to be even more conservative.

Regardless of the outcome, in such a tightly responsive market any small change in mortgage rates is closely tied to housing affordability and will have a significant impact.