KNOXVILLE, Tenn. — The East Tennessee Realtors group released its monthly report on March 27 about the Knoxville-area housing market. In that report, the group discussed the possible impact homebuyers and sellers may see after a settlement stemming from a lawsuit alleging the National Association of Realtors violated anti-trust laws.
Home sales data
The report said home sales in East Tennessee increased by around 8.9% over the last month. However, the number of home sales went down by around 1.4% compared to a year ago and the median sales price for a home in the Knoxville area was $354,000 — an increase of around 10.3% compared to 2023.
Hancen Sale, from the East Tennessee Realtors group, said that price would most likely get a family a three-bedroom, two-bathroom home that's up to 1,800 square feet.
The report also said the total number of homes available in the Knoxville area was up by around 24% compared to last year. Around 21% of sold homes went for more than the asking price, according to the report. Around 16.5% of sold homes were also new construction.
The report also said while housing inventory went up by 3% from February to March across all of East Tennessee, some counties saw declines in inventory — Morgan, Campbell, Scott and Union counties.
"I think what's driving people putting their homes in the market is really what has always driven people to put their homes on the market. And that's lifestyle changes — a job change, changing family circumstances," Sale said. "The vast majority of homeowners are locked in with a very low-interest rate, it doesn't make a lot of financial sense for people to put their homes on the market. Because essentially, now you might gain some profit, in terms of equity. But there's not a lot of homes available for sale at the moment, either."
The report also said millennials accounted for around 49.3% of all homebuyers across the Knoxville area in 2022, but represent a smaller portion of the overall population. It also said millennial homebuyers in East Tennessee tended to be wealthier than the typical buyer, with a median household income of around $98,280 per year.
East Tennessee Realtors also conducted a Market Pulse Survey among real estate professionals and members of the realty group, asking them about the fourth quarter of 2023. It said only 10% of participants saw more buyer traffic compared to last year, and only 14% of participants said they saw more seller traffic compared to last year.
However, around 37% of realtors said they expect buyer traffic to increase over the next three months compared to last year, and 29% expected the same of seller traffic. Half of all realtors in the survey said they expected home sales to increase over the next year, and around 75% expect home prices to either stay the same or increase over the next year.
The Federal Housing Finance Agency said Knoxville was the eighth-highest U.S. metro area for rising home prices, with prices increasing 11.7% year-over-year and 2.3% quarter-over-quarter. Knoxville has outpaced national rates for rising home prices for several quarters.
Impact of national settlement
The East Tennessee Realtors' report also discussed how people in the area may be impacted by a settlement with the group's national organization — the National Association of Realtors. The settlement stems from a lawsuit accusing it of violating anti-trust laws. The national organization agreed to pay $418 million as compensation, which may be dispersed to sellers and buyers across the nation. It also agreed to get rid of policies that helped set agent commissions for decades.
In the lawsuit, home sellers argued that its rules over how people access its Multiple Listing Services unfairly propped up agent commissions, incentivizing agents to avoid showing homes where the seller's broker was offering a lower commission to the buyer's agents. While the NAR does not specifically set commission rates, the lawsuit effectively argued its practices artificially kept them high. The trade organization said it denies any wrongdoing in connection with the MLS platform.
As part of the settlement, individual home sellers may be able to negotiate offers with buyer's agents, outside of the MLS platform. Some reports suggested that the prices of homes may fall because sellers may not need to factor in agent commissions as much when setting the price.
"I don't really foresee that it's going to have much of an impact on supply," said Sale. "NAR does not set commissions. They're negotiable between a home seller and their agent. And so, most of the news coverage that you've seen talking about lower commission rates is really, that's a hypothesis ... I really don't think this is going to change the calculus about whether someone chooses to sell or not."
The East Tennessee Realtors group emphasized that agent commissions are not the driving force behind rising prices.
"Some analysts have claimed the proposed settlement and resulting rule changes will lower housing costs, but we are unlikely to experience a broad decline in home prices for myriad reasons. As noted in a recent report by the Urban Institute, 'home prices and rents are primarily determined by the supply and demand for housing units and by changes to that supply and demand,' which is a simple yet important point. These changes are driven by macro-level factors such as interest rates, migration trends, and household formation. By comparison, commission rates have little, if any, direct effect on housing supply and demand," the report said.
The East Tennessee Realtors group said it launched a new webpage with more information about the lawsuit. It said changes are expected to be implemented to the MLS platform and to NAR's policies by late August, and a class notice may be sent out by the end of July. It anticipates a final approval hearing in December.
The NAR will also require buyers' agents with access to the MLS platform to enter into written agreements with those buyers. It also said payments from the $418 million settlement would be sent out over a period of around four years.
"It's going to have more of an impact on people in the real estate industry. You'll be doing the course of business in a different but similar way," he said. "Your home's worth what it's worth, regardless of how much you pay in commission."
Mortgage rates and apartment rents
The report also discussed rent prices in Knoxville, noting that apartment rents across the area increased by 2.1% compared to the previous year. In that same timeframe, national rates increased by around 0.19%.
The report also said that the "prominence of fixed-rate mortgages" nationally means few homeowners have seen their payments rise in an environment with growing interest rates.
"As a result, the U.S. housing market has fared much better than many of its international counterparts, with very few homeowners being priced out of their home in real-time," the report said.
It said around 96% of mortgage debt in the U.S. is in the form of long-term, fixed-rate mortgages. Most mortgage rates in March hovered just under 7%, according to the report. It said the average rate on a 30-year fixed loan was 6.87% for the week ending March 21, an increase compared to 6.4% at the same time last year.