After several years of dramatic price hikes, pandemic-induced chaos and razor-thin inventory, East Tennessee’s housing market is finally showing signs of stabilization, according to the newly released 2025 State of Housing report from East Tennessee REALTORS®.
While prices remain high and affordability remains a serious concern, housing supply has improved, new construction is picking up, and experts are cautiously optimistic about the region’s trajectory especially if mortgage rates ease later this year.
Here are some takeaways from the report:
The Big Picture: From Frenzy to Stabilization
- Inventory is bouncing back. Active listings in the Knoxville metro are finally back to 2019 levels, a major milestone after hitting crisis lows in 2022.
- Prices are still rising—but slower. The median sold price in the region is now $375,000, and list prices are averaging $430,000. That’s up 72% since 2020.
- Sales are rebounding. After sharp declines in 2022 and 2023, home sales grew 1.8% last year and are forecast to grow another 6.1% in 2025.
Economic Drivers: Jobs, Growth and the ‘Lock-In Effect’
- The population is growing. Knoxville’s metro area added over 10,000 new residents last year, growing faster than the national average.
- Unemployment is low. At 2.6%, Knoxville’s unemployment rate remains below the national average.
- Labor force challenges persist. A growing retiree population and declining labor force participation could strain the region’s workforce.
- Mortgage rates are keeping people in place. Many homeowners are staying put to hang onto their low pandemic-era interest rates—a trend known as the “lock-in effect.” But this is slowly loosening.
The Housing Crunch: Still Underbuilt by Tens of Thousands
- We’re short on homes. Despite more listings, East Tennessee still needs an estimated 10,500 homes for purchase to meet current demand.
- A decade of underbuilding. Since the 2008 recession, housing completions have lagged behind population growth, creating a deficit of over 23,000 homes.
- More multifamily units are coming—but not fast enough. Apartment occupancy remains around 97%, even as developers deliver thousands of new units.
Affordability: A 40-Year Low
- Buying a home is tougher than ever. Knoxville’s Housing Affordability Index hit its lowest point since 1984. Median income earners can afford just 15% of homes on the market.
- Renters are struggling too. Rent has risen 62% since 2020, while wages have only increased 15%. Over half of renters are cost-burdened, and 25% spend more than half their income on housing.
- Middle-income buyers are stuck. A family would need to earn over $136,000/year to afford half the homes on the market—nearly double the area’s median income of $70,000.
Who’s Buying, and Who’s Being Left Behind
- Investor activity has cooled. After peaking in 2022, investor purchases now make up 8.8% of sales, down from 14%.
- Cash buyers are still strong. Over 20% of homes in 2024 were bought in cash, keeping pressure on first-time and lower-income buyers.
- Racial and economic disparities persist. In Knox County, just 0.1% of active listings are affordable to Black households earning the median income. Mortgage denial rates are highest among Black and Hispanic applicants.
What’s Next for 2025?
- Prices will rise, just a bit. Home prices are expected to increase by 2.9% in 2025.
- Rents will keep climbing slowly. Apartment rents are forecast to grow by about 3.5%.
- Housing advocates hope for more supply. If policymakers, developers and community leaders work together to ease zoning restrictions and increase supply diversity, the market could balance in 5–10 years.
The Bottom Line
Knoxville’s housing market is no longer in “crisis mode” but affordability remains a pressing challenge. (Which makes it still feel like crisis mode to many.) Renters and buyers alike are facing historic cost burdens, and the need for diverse, accessible housing—at all price points—is more urgent than ever.
For now, Knoxville remains a resilient, growing region, but how it addresses the housing shortage in the coming years will determine who gets to call it home.
You can read the full report here.
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