Knoxville, TN Real Estate Market Trends & Analysis [Updated 2021]

Jump To Another Year In The Knoxville Real Estate Market:

The Knoxville real estate market may be one of the country’s hottest real estate markets. The city’s proximity to Nashville and relatively affordable home prices are responsible for an influx of demand that few other cities can compete with. On the other hand, investors have enjoyed an incredible run for the better part of a decade. There are very few markets with more promising fundamentals than Knoxville, even in the midst of the Coronavirus pandemic.

All things considered, COVID-19 disrupted the entire national housing sector. There wasn’t a single city spared by the pandemic, and Knoxville certainly wasn’t an exception. Not unlike everywhere else, real estate in Knoxville shuttered in the wake of inactivity and uncertainty. However, the largest city in East Tennessee appears to have been more resilient than many of its peers.

Local unemployment spiked in April 2020 (like everywhere else) but has recovered at a much faster rate than the national average. As a result, the Knoxville housing market will look to pace a national recovery on the heels of low interest rates, increasing demand, and more confidence in the housing sector.

Knoxville Real Estate Market 2021 Overview

  • Median Home Value: $218,101

  • 1-Year Appreciation Rate: +10.0%

  • Median Home Value (1-Year Forecast): +10.6%

  • Median Rent Price: $1,250

  • Price-To-Rent Ratio: 14.54

  • Unemployment Rate: 4.3% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 187,500 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $37,703 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 9.58%

  • Foreclosure Rate: 1 in every 8,816 (1.1%)

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Knoxville real estate investing

Knoxville Real Estate Investing 2021

Investors have enjoyed what many are calling a resurgence in the local housing market. Thanks, in large part, to its proximity to Nashville, the Knoxville real estate market has experienced an uptick in demand from those who want to escape the higher prices of its neighbor. Buying real estate in Knoxville appears to be a good investment because of the disruption onset by the pandemic. If for nothing else, there’s no telling how long today’s prices will remain at their current level.

Over the next year, home values in Knoxville are expected to increases somewhere in the neighborhood of 10.6%. Shortly after the pandemic hit, experts called for home values to drop as much as 2.0%, which makes the revised expectations all the more impressive. In less than a year, forecasts went from calling for a decline in home values to double-digit increases. For some context, the median home value across the United States is expected to increase 10.3% over the next 12 months.

In addition to what experts expect to transpire over the next year, home prices have already increased by 10.0% over the last 12 months (November 2019 to December 2020). Put, real estate in Knoxville has appreciated a lot and is expected to continue doing so. As a result, profit margins for rehabbers have grown thinner. That’s not to say flipping won’t remain a viable exit strategy moving forward, but rather that investors may want to consider another investment plan: long-term rentals.

The new landscape resulting from the Coronavirus has disrupted the Knoxville real estate market to the point that investors really need to evaluate their current strategies. In particular, two indicators are leaning heavily in favor of landlords (or prospective landlords) in 2021:

  • Low Interest Rates: As of January, the average commitment rate on a 30-year fixed-rate mortgage was 2.79%, according to Freddie Mac. At that rate, it’s one of the cheapest times in history to borrow institutional money, which helps long-term investors offset today’s high home price in Knoxville. Lower mortgage payments can help justify buying a home in Knoxville after nearly a decade’s worth of appreciation; at most, they can increase cash flow for landlords.

  • Increasing Demand: With a 14.54 price-to-rent ratio, it is more affordable to buy a house in Knoxville than to rent one. Any other year, the price to rent ratio would work against landlords. However, Knoxville’s inventory levels are insufficient and can’t keep up with the demand brought about by low interest rates. Even those who wish to buy will be relegated to the renter pool, which bodes well for landlords. There isn’t enough inventory in Knoxville, which means more people will be renting for the foreseeable future.

Investors are lucky to have several viable exit strategies at their disposal. Still, none appear more attractive than building a proper rental property portfolio in the wake of the pandemic. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.

2021 Foreclosure Statistics In Knoxville

According to RealtyTrac, a nationally recognized real estate data company that specializes in foreclosure data, the Knoxville real estate market has a relatively high foreclosure rate. More specifically, a mere one in every 8,816 homes is distressed, which equates to a 1.1% foreclosure rate.

For some context, the national foreclosure rate has declined in recent history, and looks slightly better than Knoxville. One home in every 12,448 homes in the entire country is considered distressed, or 0.8%.

The Knoxville housing market has a foreclosure rate that is slightly higher than the national average. Unlike the national average, however, Knoxville’s distressed inventory is split more evenly between auction homes and bank-owned homes. More specifically, bank-owned homes make up 66.7% of the city’s distressed inventory. Auction homes, on the other hand, represent 33.3% of Knoxville’s distressed inventory. Investors should pay special considerations to local auctions and banking institutions. Doing so will increase the odds of finding a distressed home for a discount.

For a better idea of where to look for distressed homes, here’s a list of the neighborhoods in the Knoxville real estate market with the highest distributions of foreclosures:

  • 37932: 1 in every 3,567 homes is currently distressed

  • 37914: 1 in every 9,825 homes is currently distressed

  • 37912: 1 in every 10,995 homes is currently distressed

  • 37921: 1 in every 12,138 homes is currently distressed

  • 37917: 1 in every 12,802 homes is currently distressed

It should be noted, however, that the lock-down orders issued to combat the Coronavirus will most likely impact foreclosures moving forward. While government programs and mortgage forbearance initiatives will keep people in their homes for the foreseeable future, they are more of a temporary fix than a solution.

Once the allotted forbearance periods expire, those who weren’t able to keep up with their mortgage obligations may be expected to pay all of their missed payments in one lump sum, a feat that may prove impossible for those who were hit the hardest. Homeowners with loans backed by Fannie Mae, Freddie Mac, and the FHA won’t be expected to make lump-sum payments, but even their mortgage obligations will need to be made current sooner or later. Regardless, future mortgage payments will eventually be compounded with past payments, which will be difficult for many homeowners to comply with. As a result, the Knoxville housing market will most likely see an influx of foreclosures over the course of the next 12 months. Therefore, today’s well-positioned investors may find 2021 to be ripe with opportunities.

2021 Median Home Prices In Knoxville

In one year, the Knoxville real estate market saw median home prices increase by as much as 10.0%. Real estate has been on an incredible run, to say the least. The median home value in the United States increased by 7.5% over the same period of time. Despite the disparity in recent appreciation rates, the median home value is considerably less than the national average—$218,101 and $263,351, respectively. Nonetheless, expect local real estate to make up even more ground in the coming year. The Coronavirus will impact home values, which begs the question: Will house prices go down in Knoxville?

As things stand, it’s unlikely prices will decrease anytime soon. As we turn the page on 2020, experts expect prices to appreciate nearly as much as they did in the last year. If Knoxville real estate trends continue, it looks like forecasts will play out exactly as we expect. Increasing demand onset by low interest rates, combined with a lack of available housing, should enable owners to increase listing prices sooner rather than later.

Knoxville Housing Market: 2020 Summary

  • Median Home Value: $213,420

  • 1-Year Appreciation Rate: +9.0%

  • Median Home Value (1-Year Forecast): +7.6%

  • Median Rent Price: $1,250

  • Price-To-Rent Ratio: 14.22

  • Unemployment Rate: 6.6% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 187,500 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $37,703 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 9.58%

  • Foreclosure Rate: 1 in every 12,833 (0.7%)

Knoxville Real Estate Investing 2020

The Knoxville real estate investing community enjoyed a very lucrative 2020. Few markets, for that matter, were more beneficial to local investors than the Knoxville housing market. Not only did home values continue their torrid pace of appreciation, but demand refused to decline. Historic appreciation rates couldn’t turn away prospective buyers, which resulted in a level of demand Knoxville has never seen before.

Demand for real estate in Knoxville was fed by several indicators formed as a result of the pandemic. In particular, the Fed dropped interest rates to their lowest point ever in 2020. Low borrowing costs catalyzed buyers across the country, and Knoxville was no exception. Buyers came out in droves to take advantage of 2020’s low interest rates, but inventory couldn’t keep up. As a result, competition skyrocketed, and home values continued to appreciate. Therein lies the true reason, the Knoxville real estate investing community had a great 2020: demand persisted in the face of rising home values.

However, it is worth noting that Knoxville real estate investors used 2020 to set their focus on long-term investments. Thanks to many of the indicators which emerged from the pandemic, rental properties became the preferred medium of investment in 2020. Not only was it cheaper than ever to borrow institutional money, but prospective landlords could capitalize on loans to simultaneously reduce mortgage obligations and increase monthly cash flow. On top of that, profit margins grew slimmer and slimmer for traditional rehabbers, effectively making long-term investment strategies more attractive.

Knoxville Housing Market: 2016 Summary

  • Median Home Price: $167,700

  • 1-Year Appreciation Rate: 4.9%

  • 3-Year Appreciation Rate: 9.9%

  • Unemployment Rate: 4.7%

  • 1-Year Job Growth Rate: 2.8%

  • Population: 183,270

  • Median Household Income: $33,494

Knoxville Real Estate Investing 2016

Knoxville’s real estate news was generally positive in 2016. Home prices and appreciation rates achieved moderate gains during the first half of the year while supporting factors such as home affordability, the local economy, and new housing construction gradually improved. Although prices were below the national average, gains in the previous three years extended the trend of positive growth since the recession. With gains benefiting both homeowners and investors alike, the Knoxville housing market captured momentum in recent years and got to where it is today.

One of the biggest supporters of the local market was the economy. Employment held up, as one-year job growth reached 2.8% during the second quarter. Additionally, the second quarter saw an unemployment rate of 4.7%, lower than the national average of 4.9%, and better than its unemployment the previous year. Compared to other markets, local employment growth was strong and faring better than the rest of the country.

Homeowners paid 8.6% of their income to mortgage payments in the second quarter of 2016, while the national average paid an astounding 15.8%. The ratio of price-to-income was much lower during the second quarter than its historical average of 11.5% at the time.

Knoxville Housing Market: 2015 Summary

  • Median Home Price: $150,800

  • 1-Year Appreciation Rate: 4.2%

  • Unemployment Rate: 5.4%

  • 1-Year Job Growth Rate: 3.3%

  • Population: 183,270

  • Median Household Income: $45,051

Knoxville Real Estate Investing 2015

Not unlike every city in the country, the Knoxville real estate market experienced severe setbacks following the recession. However, it was pretty evident in 2015 that the market was on an upward trend. In fact, the local housing market has continued to improve to this day.

In 2015, the market boasted a median home price of $150,800, which was lower than the national average. The national average, on the other hand, was nearly $60,000 more at the time. Today, the difference isn’t as big. Appreciation rates for Knoxville and the rest of the country were fairly comparable—4.2% and 5.7%, respectively. Despite slower appreciation rates, prices continued to grow relative to the previous year. Gains in 2015 were enough to remove real estate from a period of post-recession price weakness.

Economic and demographic fundamentals promoted a healthy balance between supply and demand in 2015. The job market, in particular, was robust. With an unemployment rate below that of the national average, the city had more residents who could afford to rent or own. However, strong fundamentals also made Knoxville real estate investing an attractive option as well. What’s more encouraging, however, was the city’s job growth rate. Over the course of 12 months, Knoxville’s job growth rate increased by 3.3%, easily outpacing the national average.

Real estate was more affordable than most markets across the country. Affordability was historically strong for the area and only continued to improve as the years went on. That said, owners spent about 8.4% of their income on monthly mortgage payments.

Knoxville County Map:

Map of Knoxville neighborhoods

Knoxville Real Estate Market Summary

Real estate in Knoxville is amongst the most coveted assets in the country. Thanks to a unique combination of relative affordability and increasing demand, local real estate investors have found the Knoxville real estate investing environment incredibly welcoming. For that matter, few cities have been able to reward investors with a higher return on investment in recent history. What’s more, the pandemic may have actually made Knoxville a better place to invest in real estate. The temporary disruption and resulting market indicators have never looked more attractive to investors. As a result, the Knoxville housing market belongs in the conversation with today’s best places to invest.

Have you thought about investing in the Knoxville real estate market? If so, what are you waiting for? We would love to know your thoughts on real estate in Knoxville in the comments below:

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