Market Pulse - September 2025

Market Pulse

SEPTEMBER 2025

For the first time this year, August home sales saw growth on all three metrics: year over year, month over month, and for the year to date. Sales were unseasonably strong, partially due to movement in mortgage rates.

If sales volume continues at the current pace, this year could potentially be the strongest showing since 2022. Optimism is the theme of the fall housing market nationally and locally, as inventory and buyers continue to return.

One note has emerged for REALTORS® from emerging data trends over the past several months: Pricing strategy is more important than ever as the spread between list and sale price begins to widen back to historically normal levels.

Home Sales Report

AUGUST 2025

East Tennessee home sales in August saw a healthy 2.1% increase over July, and a 7.4% increase over August 2024.
The median sale price was $376,200 — up 3% from the previous year.
Total housing inventory has increased 31.4% from the previous year.
Half of the homes sold were under contract in 28 days or less, up from 20 days a year ago.
39% of homes sold for the asking price or above, with 18.3% selling for more than the asking price. 7.9% sold for at least $10,000 over asking and 2.7% sold for at least $25,000 over asking price.
5.5% of all homes sold in August sold for more than $1 million, a new high mark for the year.
The sale-to-list price ratio lowered slightly to 98.6%, still up from 97.6% a year ago.
New construction was 11.9% 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?

August sales saw a boost over July, outperforming the prior year and bringing the year-to-date total up by nearly 4%. While a slight August increase is a seasonally expected trend, last month's sales also benefitted from lending rate optimism and an increase in applications as 30-year fixed mortgage rates eased to mid-6%. However, all the conversation about mortgages has also made some buyers continue to hold out in hopes of a rate miracle.

Our members continue to report that buyers are more selective than ever, wanting extra amenities in exchange for today's high market prices. The sale-to-list ratio has dropped slightly, and overall days on market continues to tick up each month. Buyers push back on small tradeoffs, say no to DIY work and want extra perks for their dollars.

It's not yet a "buyer's market," but the increased inventory available and skittish buyers means that a good pricing strategy is more important than ever. 39% of homes sold for asking price or above in August, the lowest percentage since the surge began in early 2021. Historically, an average of 28-30% in recent years would have been considered normal. This is just one of the indicators we have seen in 2025 that shows the East Tennessee market is stabilizing, while still growing.

Inventory by county

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

Next stage of Advance Knox: Knox County development ordinance

Starting in 2021, the Advance Knox planning process has been a herculean effort by Knox County, Knoxville-Knox County Planning and many community partners to envision the future of land use and development in the county.

The process began with a broad growth policy plan, which then was translated into a more detailed comprehensive plan. Hundreds of community meetings, thousands of input comments and several years of consultant work resulted in the current Advance Knox Comprehensive Land Use and Transportation Plan, which we encourage you to review here.

One of the most important pieces of the comprehensive plan was the future land use classes, which dictates the shared vision for how the county will grow.

Now, the county is undertaking the final step of codifying those priorities into one clear, concise Universal Development Ordinance (UDO) - a best practice document that neatly rolls all of the subdivision regulations, zoning, development ordinances, landscape requirements and more into one resource.

The biggest need of the new ordinance is to clean up more than 800 pages of overlapping, confusing and sometimes outright contradicting development regulations that have resulted in a system where the outcome of any project is uncertain both for developers and neighbors and relies on interpretation of planning staff, planning commissioners, county commissioners, county engineers and zoning appeals.

Although these groups have worked hard in recent months to try to make decisions with the Advance Knox plan in mind, many years of inconsistency in application has both eroded trust in the process and served as a serious barrier to housing in the county, adding cost and delaying projects. The UDO is the opportunity to solve this.

East Tennessee REALTORS® recently shared a statement of priorities for the UDO, to help members, community partners and housing advocates align throughout the process.

ETNR's priorities were compiled through many discussions with REALTORS®, developers, builders, industry lenders, planning staff and community partners:

Create zoning that defines and supports the planned growth areas in the Advance Knox Comprehensive plan.

Utilize form-based code to encourage good design while enabling diversity of building types, especially in residential zones.

Incentivize the types of development called for in Advance Knox by simplifying zoning requirements, allowed uses and density.

Simplify processes, remove ambiguity and clarify intent to improve the application, review and approval processes for development.

Download the ETNR UDO Priorities

ETNR staff and members participated in many of the initial feedback and input meetings, and were highly encouraged by the professionalism and initial audit results from the Orion Planning + Design team, working closely with Knox County and Knoxville-Knox County Planning staff.

Public input on the audit results and initial feedback compilation is welcome now on the Advance Knox website.

Give feedback to inform the UDO draft

Housing as a state responsibility: NAR signs on to Pew cooperative calling for state-level action

States have long left housing market decisions like zoning to local governments, and that's unlikely to change on a broad scale. However, a growing consensus is urging legislatures to do more to remove barriers at the state level and enable the creation of more housing.

Researchers, think tanks, housing industry advocates and political leaders have all joined the conversation to encourage more state action on housing, with extremely successful efforts seen most recently in states like Montana and Ohio.

Pew Charitable Trust is the latest to join the effort, releasing "Principles for Enhancing Housing Availability and Affordability," a clear list of policy best practices that states can adopt to help localities make more progress on housing.

The National Association of REALTORS® joins more than 50 other pro-housing organizations in support of the Pew recommendations, urging states to do more to help local governments overcome housing challenges. Because the barriers are overwhelmingly policy-based and require significant reform, the market simply cannot correct the supply issue on its own.

The recommendations build on state policy updates that have been broadly successful, breaking down specific actions that can be taken in four categories:

Facilitate a broader range of housing options
Alleviate regulatory burdens
Promote growth in high-use areas
Reduce administrative barriers to building more housing

While many states have long held the policy stance that local governments know best on matters of housing, zoning and land use, many years of local advocacy have demonstrated that some areas are unable to move forward without state support. These regions risk a range of long-term economic damage from housing shortages, including a weakened labor pool, loss of residential and commercial revenue and increased homelessness.

It's important not to dismiss the call for state involvement as overreach; the Pew recommendations call for states to enable better local actions by setting a strong foundation of support.

Pew Charitable Trust is a venerable nonpartisan research organization whose mission is to use data-backed insights to help find common ground and address today's challenges. NAR endorsing the recommendation is part of a broader effort to increase the supply of housing nationwide.

Read the recommendations

Rent growth holds steady

According to the latest Apartment List report, rent in the Knoxville area market has stayed the same over the last month, grown 2% so far in 2025, and year-over-year is down 2.8% from August 2024. The modest growth this year can be attributed to a slowdown in multifamily permitting and apartment additions, with RealPage projecting that only 1,208 new units will be completed in 2025 compared to 1,505 in 2024.

The slight imbalance of supply and demand has resulted in a higher occupancy rate ticking back up to 96.3%, an 0.6% increase since Q1 2025 and an 0.5% increase since last year. These are nominal changes, with the market staying relatively stable.

However, if we take a longer term view, the annual need has been around 1,500 new units each year; 2025 is projected to be 1,445 units. An annual deficit of 500 units with continued population growth will steadily drive rents up again.

The downtown/university rental market continued to lead price growth in the Knoxville area, with the average rent in this segment increasing 3.4% over the first two quarters of 2025.

Headwinds to multifamily building this year are complex, with local permitting having improved but material costs, labor constraints and national supply uncertainty taking a toll. Q1 was extremely flat as builders contended with market uncertainties, but Q2 improved significantly. According to the National Home Builders Association survey, builder confidence also improved substantially in Q2.

For a broader perspective, East Tennessee rents have been stable for several years, but the effective rent increase in the 9-county metro area from 2020 to 2024 is 62%, translating to about a $577 monthly increase for the average renter. The steep growth post-covid has made it difficult for renters to catch up despite healthy job and wage growth in East Tennessee.

With the population center of the area in Knoxville, it is crucial to continue multifamily permitting and building at a higher rate to keep rents from pushing residents and workforce into outerlying areas as we grow.

Pending home sales show more signs to be optimistic.

August's pending home sales report from NAR indicated growth both month-over-month and year-over-year, and contract activity in the South increased by 4.2% over 2024.

NAR attributes the surge mostly to mortgage rates and market optimism about the resulting improvement in affordability for many families waiting to jump into the market. Read the article here.

"Lower mortgage rates are enabling more home buyers to go under contract. In the Midwest, low mortgage rates combined with high levels of affordability are attracting more buyers compared to other regions."

– Dr. Lawrence Yun, Chief Economist at NAR

Mortgage Rate Update:
Market moves uncoupled from rates

According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed mortgage rate (30Y FRM) dropped to a low of 6.26% as of the week ending September 18, but then bounced up after the Fed conference to 6.3% for the week ending September 25 compared to 6.08% one year ago.

As broadly expected, the Federal Reserve cut the bank exchange rate by 25 basis points at the September conference. This could have had several different results on the mortgage market; in 2024, for example, Fed cuts resulted in mortgage rates shooting upward as the market saw it as a sign of potential economic weakness.

This year, however, the market largely reacted more calmly and in advance of the cuts with rates lowering for 3 weeks straight, and mortgage applications leaping 39% the week before the Fed conference. Widespread media coverage, presidential administration public pressure on the Fed and expectations of the rate cut led to an early drop in the 10-year treasury bonds, causing mortgage rates to dip well before the announcement.

The Mortgage Bankers Association's latest report shows a huge 18% increase in applications over 2024, even though last year's rates were better than this fall. General optimism about increased affordability seem to have granted confidence to the housing market that is not necessarily tied to rates as it may have been in the past - 2024's reaction to a much lower rate was lackluster compared to this year.

How are REALTORS® and lenders navigating this? As the old saying goes, "The best time to plant a tree was yesterday, and the second best time is today." Our members are advising their customers to make financial and homebuying decisions when it is right for their personal needs, not by hedging bets on potential future market moves.

Read the latest from the Mortgage Bankers Association