KNOXVILLE, Tenn. (WATE) — For months you have heard WATE 6 report on people paying more for houses and being forced to compete harder in a hot housing market.
That matched up with reports around the country, until a couple of weeks ago, when we heard analysts singing a different tune: that average prices in the United States had peaked. Does that mean Knoxville’s market will cool off, too?
As competition dies down, groups like the Knoxville Area of Realtors (KAAR) expects to see a “moderating” market, meaning even though mortgage rates will likely remain at their highest level since 2010, homebuyers will have more of a chance of finding their dream home.
“We are starting to see inventory creep up,” KAAR Governmental Affairs and Policy Director Hancen Sale said. “That is largely the result of higher interest rates and higher home prices.”
Even though competition between local house hunters is starting to ebb, other factors still present challenges.
“There was a time here where a West Knoxville house could have, easily, 20 to 30 offers and that was almost a thing of a norm,” VFL Realtor Steven Hensley explained. “But now with those interest rates climbing up, it’s really slowing down so that house maybe only having five to ten offers.”
The “Triple Trouble” of the Housing Market (KAAR)
- Record high home prices. Nearly a decade of underbuilding and increased domestic migration from the pandemic created a substantial housing supply demand gap. As a result, home price growth has vastly outpaced household income growth.
- Sharply rising mortgage rates. Elevated borrowing costs due to higher interest rates have reduced consumer buying power considerably, redefining the affordability challenge altogether. Even when holding income constant, prospective buyers’ budgets are shrinking in real-time.
- Record low inventory. Not only can people afford fewer homes due to lower affordability, but prospective homebuyers’ options are limited even further as there are significantly fewer homes available for sale.
According to KAAR, Knoxville’s median home sales price was $325,000 in April. In addition, 53% of those homes sold for over asking price and half of those were under contract in four days or less.
Another surprise for realtors and house hunters? An influx of cash offers.
“We see it all the time,” Hensley said. “I had one, we were putting in an offer over the weekend, same thing. They told me they had two cash offers already in hand and it wasn’t even their best offer.”
While that is great for those who can afford to do that, Hensley said many people do not have that luxury. And as many hope home prices will fall, so far, those chances are not good.
“A lot of people talk about home prices falling but it’s really not been born out of the data at all at this point,” Sale said.
So where does that leave homebuyers? And is there any glimmer of hope on the horizon?
“So with rates higher it actually makes this area in East Tennessee more attractive to potential buyers so I think we will continue to see demand in this market but I think we will see it wane down to a more healthy level,” Sale told WATE.
According to Hensley, West Knoxville is one of the county’s most prime areas, meaning house prices there are oftentimes much higher than other homes in the city. A quick check of Zillow, a home-finding website, reveals there are approximately 800 houses on the market in Knox County.
“I personally am seeing fewer offers on properties that I have buyers showing interest in. I do feel that the market seems to be starting a trend toward a balance of sorts, but I am not sure the prices will decrease,” said Kristin Maupin with Town & Country – Realtors of East Tennessee. “While the demand for housing remains so high, the sellers will be able to continue to demand the increased prices. Hoping to see it balance out soon though for the sake of all of these buyers.”
Below you can read KAAR’s latest Market Pulse report for May 2022. It contains information regarding buyers, information regarding rumors of a housing market crash, and how Knoxville’s labor market relates to the city’s housing market.