Market Pulse - May 2026

Market Pulse

MAY 2026

Spring has arrived for the East Tennessee housing market, after several months of mixed signals. Sales and inventory surged in April despite lingering consumer uncertainty, and pending sales indicate continued momentum in May.

Our Q1 Market Pulse survey results show that members are cautiously optimistic, reporting increased sales, more first-time buyers and more balanced market conditions than last year. We dive into the details below.

May's must read: Check out this excellent story and interactive visual from the New York Times Editorial Board. America Needs To Build More Housing

Home Sales Report

APRIL 2026

East Tennessee home sales increased 8.9% in April from 2025.
The median sale price was $369,318 — down 2% from the previous year.
Total housing inventory has shot up 20% from April 2025.
Half of the homes sold were under contract in 32 days or less, up from 24 days a year ago.
41.1% of homes sold for the asking price or above, with 18.2% selling for more than the asking price. 7.6% sold for at least $10,000 over asking and 2.5% sold for at least $25,000 over asking price.
The sale-to-list price ratio fell slightly to 98.7% compared to 99.3% a year ago.
New construction was 13.9% of total home sales, down from 14.4% in 2025.

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 March, April resembled the typical busy spring housing season in East Tennessee. Sales jumped nearly 9% over April 2025 as sellers added fresh inventory. Buyers appear to be less sensitive to mortgage rate movements after enduring several months of weekly ups and downs. Encouragingly, pending sales were also up nearly 20% over last year.

For the second month in a row, the median home sale price has been lower than 2025 despite the increased sales activity; the nearly six-year streak of rapid price appreciation appears to be over.

Contrary to recent news articles, East Tennessee homes are not "overpriced." The list-to-sale ratio remains steady at 98.7%, and nearly half of homes sold at or above the list price in April.

Thankfully, the continued demand and slow pace of easing growth has created an ideal scenario. Rather than a sharp correction from post-pandemic price highs, premiums are slowly easing while the underlying value of the homes holds up well. This is good news for homeowners, buyers and sellers alike, and for our regional economic health.

However, this doesn't mean homes have become affordable to most residents. Inventory is still a constraint, remaining tight in the mid-to-lower price tiers where demand is fiercest and potential buyers are value conscious. Many of the single-family listings being added this spring are in the "luxury" range; in April, 16% of all new listings were priced over $1 million.

Consider that the annual median household income in our region is approximately $75,000, meaning that family might comfortably afford a $275,000 home.* In April, East Tennessee only added 629 listings priced at or under $275,000. By contrast, the market added 2,610 listings priced above $275,000.

As the East Tennessee market continues to recover and shows healthy indicators of growing sales, performance will vary widely depending on price range, location and availability of inventory.

*Assuming 30% of gross monthly income allocated to housing costs , 5% down payment, 6.6% 30-yr FRM, includes property tax and home insurance.

Inventory by county

Out of the 12 counties in the East Tennessee REALTORS® footprint, 11 marked measurable increases in active listings month-over-month. Overall, regional inventory increased month-over-month by 8%.

Market Pulse Survey reports cautious housing optimism

The Q1 2026 results are in, and East Tennessee REALTORS® members are beginning to see improvement after several tough years of home sales.

Buyers and market traffic were especially optimistic at the beginning of the year compared to prior years, and sellers are jumping in with the expectation of a busy spring season.

79% of respondents expect home sales to stay the same or increase this year over last year, and 83% closed a sale before April.
98.5% of sold homes appraised at or above the sale price.
More than half of respondents said their last buyer was renting prior to this purchase, in contrast to last year where most buyers were previous homeowners.
60% of reported transactions were residents moving within their own county, in contrast to last year when most were arriving from another state.
Many members commented that pricing is more important than ever, and buyers have high expectations.

While movement is up, there are also several concerns that members share about consumer hesitancy, and buyers continuing to be more selective than ever.

Explore the full results

Affordable rental demand increasing

Homeownership and renting are two sides of one coin, with the rental market often showing the winds of economic shifts 6-12 months before the same effects are reflected in housing sales. Supply of each affects the other, and continued tightness in the home sale market in East Tennessee is driving residents toward rentals.

As housing supply lags steadily behind demand and ancillary costs like insurance have increased, the total cost of homeownership has grown nationally and at home. According to a recent Q4 2025 study from the National Association of REALTORS®, the median monthly home payment in the Knoxville MSA is now about $1,931 while the monthly rent payment is $1,864.

For those who can afford it homeownership is a much better long-term financial investment, but many residents lack the credit or financial resources to access the inventory available here.

As we noted above, currently a household making the area median income of around $75,000 can only afford to buy the lowest-priced 15% of the listings for sale. The equation has worsened in recent years as rapid growth caused a mismatch in the types of housing supply available for rent and ownership with those seeking it; the market is flush with higher-priced inventory, but the bulk of demand is for more affordable homes.

Another recent study from Apartment List looked only at new renters versus new homeowners with mortgages, who had moved within the last 12 months of the data snapshot. This comparison eliminates owners who might have much more favorable interest rates from previous years. At the end of 2024, the median monthly payment for new owners in the Knoxville MSA was $2,537 where median rent was only $1,481.

With nothing available to buy that they can afford, many households who would normally be entering the ownership market are turning to rentals.

The rental market shows us that this supply-demand gap between income levels is growing. In April 2019, the occupancy in Class A rental units was 95% while Class C occupancy was 96.99%. This is fairly typical in a healthy market; more affordable units are usually slightly more in demand.

In April 2026, Class A occupancy has dropped to 93.66% (balanced) while Class C occupancy has risen to 97.16% - what we would consider extremely constrained.

At the same time, the average effective rent for Class C units across all sizes has increased from $643 per month in 2019 to a whopping $1,167 in April 2026, an increase of about 81%.

Looking forward, multifamily delivery has slowed rapidly over the last year. Only 971 units were completed in the last 12 months, and only 991 units are scheduled to be completed in the next 12. This is likely to cause previously flat rental rates to start rising again as early as the first quarter of 2027.

Source: RealPage Market Analytics

What can we do about this? With the cost of land still high, limited lots available for multifamily zoning and steep regulatory hurdles, the cost of multifamily building has continued to increase. East Tennessee municipalities should do everything possible to incentivize the creation of more affordably priced units, from removing regulatory barriers to using public incentives such as Knoxville's Affordable Rental Development Fund.

Knox County considers limiting ownership of rental homes

At the last meeting in May, the Knox County Commission introduced a new proposed ordinance called "Homes Not Hedge Funds," a copy of the bill of the same name that was recently rejected in the state legislature.

The ordinance would limit any investor from purchasing more than 100 single-family detached homes for the purpose of renting, and create the ability to bring civil action against any investor who outbids an individual for a home. It also notes that the intent is to protect the county from significant and growing "institutional investor" activity that is driving up the price of homeownership.

While the concept sounds promising, the facts tell a different story; we do not have significant investor presence in Knox County, and what we do have has been beneficial for the market.

Our analysis of public records from the Knox County Register of Deeds and Property Assessor shows that investors of any size, including individual trusts, LLCs and other business types, own about 8% of the total single-family housing stock in the county. The pace of investor purchases has been relatively flat, and total investor share has grown less than 1% over the last 5 years.

Similar analyses on a more granular level from Realtor.com and Parcl Labs indicated that "institutional investors" (if defined as entities who own more than 350 single-family homes anywhere) are estimated to hold between 0.4-0.6% of our single-family housing inventory.

Looking at price, our records also show that on average, investor purchases over the last 3 years were about $100-150,000 lower than the median home sale price to individuals, and that they had little to no effect on raising home prices.

Anecdotally, these purchases were often distressed or unsuitable for sale for other reasons; one member told us how grateful her elderly sellers were that an investor bought their home after it had been on the market with major repair issues for over a year. The home has since been renovated and is now rented.

The basic laws of supply and demand are in full effect in Knox County: tight inventory for sale means that prices are at a premium, and many families are seeking rentals. Local builders have begun working on "build-to-rent" homes in response, adding inventory that can be managed by one company as a rental community. This ordinance would effectively prevent the sale of these communities.

Why build single-family detached rentals? With more than 80% of land in the county zoned to only allow single-family detached homes, this is the only viable choice to fill the need. In addition, households who would normally prefer to buy cannot afford the cost of our inventory - if sold, the homes would have to be priced at a premium. Offering the homes as rentals allow them to enjoy the traditional suburban experience at a monthly cost they can afford.

This 3-bed, 2-bath home rents for $1,820 per month in Hardin Valley and is managed by a family-owned rental company with about 80 homes in Knox County. Using the basic definition of affordability as 30% of monthly gross income, this home would be attainable for a household making $72,800 per year or more.

While there is little institutional investor presence in our single-family rental market, there are more family-owned private companies who manage detached rental homes and are close to the ordinance threshold. We asked two of them for data. Both groups have more than 95% occupancy of their rentals, showing that the inventory is priced correctly for our market. One of them specializes in affordable rentals, and about 10% of their renters pay less than $800 per month.

This ordinance would affect a small number of players in our region, but any effort that blocks investment in affordably-priced housing is a blow to our already tight inventory and hurts our chances of reaching a balanced market in the future.

After reviewing the ordinance, the commissioners determined that there were questions around legality, impact and enforcement. The ordinance was postponed 60 days to allow discussion and research, and may appear on July's agenda.

If you own or manage single-family detached rentals and want to weigh in with your experience, email us at marketpulse@etnrealtors.com.

Buyers edge back into the market

National pending home sales were up 1.4% month-over-month in April, following two months of small increases. This represents a 3.2% increase over the same time last year.

Despite economic headwinds, foreign policy concerns and rising inflation, buyers are coming back to the market. Experts say that as lending rates and prices stay largely steady, buyers are beginning to see that waiting for a big drop is not the best strategy.

“Buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates."

- Dr. Lawrence Yun, Chief Economist for the National Association of REALTORS®

Read the full analysis here.

Mortgage Rate Update

The 30-year fixed mortgage rate (30Y FRM) has ticked up above 6.5% in April and May, ending the month at a weekly average of 6.53%.

All eyes are on foreign policy as the ongoing conflict in Iran continues to affect energy prices and inflation. Rates could potentially change if an agreement is reached in the summer.

Looking at central bank monetary policy, the Federal Reserve is unlikely to cut rates again in 2026 after the latest job reports continued to be stronger than expected. Based on all available information, the outlook for mortgage rates appears to remain in the current range.

Read the latest from the Mortgage Bankers Association