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

by Than Merrill | @ThanMerrill
Published on Fri, Jun 11 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. The pandemic didn’t spare a single city, 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 (Knoxville County): $250,248

  • Median List Price (Knoxville Metro): $339,217

  • 1-Year Appreciation Rate: +17.5%

  • Median Home Value (1-Year Forecast): +13.8%

  • Weeks Of Supply (Knoxville Metro): 9.2

  • New Listings (Knoxville Metro): -3.1% year over year

  • Active Listings (Knoxville Metro): -34.19% year over year

  • Homes Sold (Knoxville Metro): +9.7% year over year

  • Median Days On Market (Knoxville Metro): 39.20 (-15.50 year over year)

  • Median Rent: $1,250

  • Rental Vacancy Rate: N/A

  • Price-To-Rent Ratio: 16.68

  • Delinquency Rate: N/A

  • Unemployment Rate: 3.7% (latest estimate by the Bureau Of Labor Statistics)

  • Population (Knoxville Metro): 187,603 (latest estimate by the U.S. Census Bureau)

  • Median Household Income (Knoxville Metro): $40,341 (latest estimate by the U.S. Census Bureau)

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Knoxville housing market

Knoxville Real Estate Investing 2021

There is no doubt about it: The pandemic has altered how real estate entrepreneurs think on a national level. At the beginning of last year, in fact, everything we thought we know about investing had been uprooted in a matter of weeks. Fear and uncertainty caused a bottleneck in the U.S. housing sector, as buyers refused to tour homes and sellers pulled listings off the market. Nonetheless, investors rallied and made the best of an “unexpected” situation. Home sellers across the country, in particular, have enjoyed a lucrative year.

According to Attom Data Solutions’ latest Home Sales Report, “the typical first-quarter 2021 home sale in the United States generated a profit of $70,050. That was down from $75,750 in the fourth quarter of 2020 but still up 26 percent from $55,750 in the first quarter of 2020.”

“The typical $70,050 home-sale profit represented a 34.2 percent return on investment compared to the original purchase price – down from 37.1 percent in the fourth quarter of 2020 but still higher than the 30.8 percent level recorded a year ago.”

As it turns out, the Knoxville real estate market has helped skew national home sales numbers higher. Few cities, for that matter, saw gains on the level of Knoxville, which led the country in profit margins.

“The biggest annual increases in profit margins came in the metro areas of Knoxville, TN (margin up from 45 percent in the first quarter of 2020 to 122.1 percent in the first quarter of 2021); Nashville, TN (up from 48.2 percent to 92.1 percent); Boise, ID (up from 60.6 percent to 102.8 percent); Crestview-Fort Walton Beach, FL (up from 23.7 percent to 58.7 percent) and Chattanooga, TN (up from 38.1 percent to 72.5 percent),” according to the Home Sales Report.

Investors fortunate enough to benefit from recent appreciation rates in Knoxville have found 2021 to be quite a lucrative year. That said, appreciation is a double-edged sword: As prices continue to march higher, profit margins on future flips are in jeopardy. Therefore, a large portion of the Knoxville real estate investing community has turned to long-term exit strategies. In particular, the new market created in the wake of the pandemic appears to be very conducive to building rental portfolios.

For starters, interest rates on traditional loans are about as attractive as they will ever be. The Fed’s decision to lower interest rates to spur buying worked well and those seeking a traditional mortgage can secure an interest rate somewhere in the neighborhood of 2.96% on a 30-year fixed mortgage, according to Freddie Mac. At that rate, real estate investors in Knoxville can secure funding for a deal while simultaneously offsetting today’s higher prices and increasing their monthly cash flow from properties placed in operation. Now, perhaps more than ever, is one of the best times to pay down a mortgage with someone else’s money, and Knoxville real estate investors are well aware of the opportunity at hand.

The Knoxville real estate market is unique in that there still appears to be room to make money on flips and rehabs. However, it’s only a matter of time until profit margins catch up with the rest of the country. Local investors should strongly consider switching to long-term exit strategies to stay ahead of the curve. That is not to say rehab opportunities won’t persist; only that now is a great time to consider building a rental portfolio.

2021 Foreclosure Statistics In Knoxville

According to Attom Data Solutions’ Q1 2021 U.S. Foreclosure Market Report, a total of 33,699 U.S. properties received a foreclosure filing (default notices, scheduled auctions or bank repossessions) in the first quarter of this year. According to the latest research, nationwide foreclosures are up 9.0% from the last quarter of 2020 but down 78.0% from this time last year.

“The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. So it’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.”

The Knoxville real estate market is no exception to rising foreclosure rates. The pandemic misplaced too many families’ financials to assume otherwise. However, Knoxville’s unemployment rate has fared much better than the national average and should help homeowners across the city. Additionally, Tennessee is expected to receive more financial help to support those who fell behind on payments. The financial aid will help curb the foreclosure rate a bit, and landlords can take solace in the fact that more of their tenants will be able to pay on time.

2021 Median Home Prices In Knoxville

The median home value in Knoxville is about $250,248, which is the result of historical appreciation. Over the course of the pandemic, real estate in Knoxville continues to increase in value. Halfway through 2021, the median home value in Knoxville continues to test new highs each month. Today’s historical prices are the direct result of the new marketplace created in the wake of the pandemic. In particular, the city currently has just under three months of inventory on the books, which is nowhere near enough listings to keep up with today’s demand.

Most balanced markets want to have about six months of inventory, which means Knoxville has a lot of ground to make up. The lack of inventory has led to steady competition, and homeowners have increased prices accordingly. In the last year alone (April 2020 to April 2021), the median home value in Knoxville has increased 17.5%. If that wasn’t enough, prices have jumped 7.8% over the first six months of 2021. To put things into perspective, median home value in the United States has increased 11.6% over the last year and 3.8% in the last six months.

Moving forward, there’s nothing to suggest Knoxville won’t continue its torrid rate of appreciation. Some analysts predict real estate in Knoxville could appreciate by as much as 13.8% over the next 12 months. The increase will most likely be driven by a distinct lack of inventory and improvements in employment indicators. As the economy continues to open up and more people are working, low interest rates will continue to drive up demand. However, building permits are nowhere near where they are needed to be. Since builders sat on the sidelines for the better part of a year, new builds are still a ways out. Until new listings can be brought to the market, demand will continue to drive prices higher in the Knoxville real estate market.

Knoxville Real Estate Market Trends In 2021

The Knoxville housing market has managed to outpace national averages in almost every positive way possible. However, in light of the Coronavirus, we will want to keep tabs on which trends look secular and which are going away sooner rather than later. Here is a look at the Knoxville real estate market trends which are most likely going to have a lasting impact:

  • Improvements In Unemployment Will Increase Demand: Over the course of the pandemic, unemployment spiked in Knoxville. However, as more Americans get vaccinated, and Knoxville continues to lift restrictions, unemployment will improve. At about 3.7%, Knoxville’s unemployment rate is about one-third of where it was at last year. If trends continue as expected, more buyers may enter the market and increase competition further. As a result, there appears to be a growing correlation between the strengthening economy and higher appreciation rates.

  • New Builds Will Struggle To Help: Building permits continue to leave a lot to be desired. Consequently, inventory levels will remain tight for the foreseeable future. As a result, there’s a good chance appreciation rates will remain in the double digits until new listings can release pressure.

  • Rentals Will Receive An Influx Of Demand: More people will be forced to rent without sufficient inventory levels. In fact, Knoxville’s 16.68 price-to-rent ratio all but ensures the rental market will receive added attention. Home affordability will continue to increase competition over the little inventory available, forcing more people to remain a part of the renter pool (even if they can afford to buy). As a result, rents are expected to increase in the coming year.

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 rewarded 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.

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