KNOXVILLE, Tenn. — According to a report from the East Tennessee Realtors group, households earning $75,000 per year can only afford around 12.5% of available homes in the Knoxville real estate market. They said in a balanced market, they could afford 60.6% of active listings.
The group, previously known as the Knoxville Area Association of Realtors, said East Tennessee home sales increased in May — up by 12.2% compared to April. However, they also said home sales were down by around 10.2% compared to a year ago.
They also said the median home sales price was $335,000 in May, up by 0.9% compared to the previous year. They said half of the homes sold were under contract in eight days or less, and around 32% of homes sold for more than the asking price. New construction represented around 12% of total home sales, they said.
They said home sales accelerated in May, reflecting a short decline in mortgage rates during April.
"Today's homebuyers have proven extremely sensitive to mortgage rates – which is likely to keep home sales bouncing back and forth over the next few months," ETR's report said. "Moreover, after briefly stalling in late-2022 and early-2023, home price growth continued to accelerate in the East Tennessee region as the lack of inventory and dearth of new listings have increased competition, especially for homes under $400,000."
One of the main reasons homes aren't being built for $250,000 or less is because of land prices, they said. The report said a quarter-acre lot in the Knoxville area was around $104,000 in 2021 — an increase of around 250% compared to 2012. They said it far outpaced the rate of inflation for the same period.
They also said while market activity appeared to have normalized, to a degree, conditions are different compared to previous years. They also said the market has been most severe for low-income and moderate-income homebuyers.
People earning $64,894 per year, the median household income in 2021, can only afford to buy 7% of active listings in Knox County. ETR warned that the trend would limit economic mobility in the area, and would hinder the area's ability to attract and retain workforce talent.
"Higher mortgage rates and historically low inventory levels have created a dynamic that is, in many ways, uncharted territory. While the old axiom 'something's gotta give' has been a common refrain among homebuyers in recent years, data increasingly suggest the current market conditions are here to stay," they said.
They said that the required monthly payment to afford a median-priced home in Knox County rose to $2,245 per month — an increase of around 20% compared to last year.
The report also found that rents for apartments in Knoxville were up by around 9.2% compared to the previous year. In the same timeframe, they said rents nationally grew by only 2.3%.