KNOXVILLE, Tenn. — The East Tennessee Realtors group released its monthly report on Friday, showing that Knoxville was second in the nation for the rising appraised value of homes.
It said that according to the Federal Housing Finance Agency, the appraised value of homes rose from $347,000 to $370,000 over the past year — a rise of around 9.1%. The city was only beaten by the Miami, Florida area which saw a 10.3% rise in prices.
Knoxville was followed by El Paso, Texas, and the Allentown, Pennsylvania area. Rochester, New York ranked fifth on the list.
Appraised home values are not exactly the price of homes when they are put up for sale. Usually, finance agencies or homebuyers will get an appraisal on a home when buying it, to determine its value. County leaders also conduct home value appraisals whether they are up for sale or not, and use that information when calculating property tax rates.
The East Tennessee Realtors group also said despite the rise in appraised home values, the total number of appraisals in the Knoxville area was down by more than 27% compared to the previous year. They said the decrease in appraisals indicated fewer people buying homes in the region, likely as a result of higher mortgage rates and scarce supply.
The group said it expects East Tennessee home sales to continue falling. They said as of the first week of October, the monthly payment for a median-priced home rose to $2,400 — an increase of around 22% from around a year ago.
"Nonetheless, low housing supply has outweighed the decrease in demand, which is why home prices have continued to rise in recent months even as sales fall," the group said in a release.
According to a survey by John Burns Research and Consulting, around 71% of prospective homebuyers said they would not be willing to accept a mortgage rate above 5.5%. The number is significantly lower than the prevailing mortgage rates hovering around 7.5%, according to the release.
Federal Reserve leaders are expected to hold interest rates steady at their next meeting, and the East Tennessee Realtors group said mortgage rates are expected to peak over the fourth quarter of 2023.
"But when they will begin to decline is a more nebulous question. With inflation falling at a gradual pace, policymakers are poised to hold rates higher for longer and rate cuts are likely out of the question in the near term," the release said.
The release also said nearly half of all renter households in Knox County are considered "cost-burdened," meaning at least 30% of their household income goes towards rent. However, they said a historic number of apartment units are under construction in the area and should become available over the next two years.
The group said new apartments in the Knoxville metro area are 1% more expensive than those built in the 2010s, but 20% more expensive than those built between 1990 and 2009. The release said because of the large amount of new construction and because of pricing trends compared to different decades, an influx of new inventory could lead to stagnant rent prices, or possibly rent cuts.
"In other words, roughly half of Knoxville's apartment market will likely experience stagnant rent growth in the short term and new projects may face lease-up challenges as new completions hit the market; however, these units will eventually lease-up," the release said.
However, since those new units have not yet hit the market, the release said rents in Knoxville still increased by 4.5% compared to the previous year in the third quarter of 2023. It grew 0.04% nationally, in the same timeframe.
The group also said Knox County saw 21,000 more remote workers in 2021 compared to 2019, and most of those workers were located inside of Knoxville's city limits.
"Much of the rise in the remote workforce locally can be attributed to an influx of remote workers who moved to Knoxville from larger, more expensive metros," the release said.
The release said the Knoxville area is at a low risk for a home price correction, based on foreclosure action bidding behavior.
"The data from Auction.com, which accounts for roughly 40% of all properties brought to foreclosure auction, indicates that Knoxville's foreclosure sales volume in Q3 2023 was just 29% of 2019 levels. On average, the winning bid at foreclosure auction in the third quarter was 46% of the estimated after-repair value, which is remarkably similar to the average bid-to-value ratio in 2019," the release said.