After a prolonged downturn spanning nearly two years, East Tennessee’s housing market is expected to rebound in 2024, culminating in modest home price growth and a significant increase in annual home sales. Much of the growth in home sales can be attributed to the expected decline in mortgage rates over the next year and improving affordability conditions, which will facilitate the return of buyers who were previously priced out of the local market. By comparison, a supply-demand imbalance driven by a chronic undersupply of housing will continue to exert upward pressure on home prices. Other long-term market forces, such as favorable demographic trends, migration and changing household composition, will further stimulate market activity.
- Home price growth continues to decelerate but remains above the historic average. Home prices in the Knoxville metropolitan area rose 11.3% from the previous year in the third quarter of 2023, according to the FHFA House Price Index (HPI).
- After falling 9% and 15% year-over-year in 2022 and 2023, respectively, home sales are poised to rebound in 2024. Total home sales are expected to return to pre-pandemic levels, with home sales forecasted to increase 11.1% in 2024.
- Although affordability conditions remain near a record low, a chronic undersupply of housing continues to exert upward pressure on prices and will provide support for further growth, with home prices forecasted to increase 3.6% in 2024.
- After experiencing double-digit increases in 2022, rent growth slowed considerably in the latter half of 2023. Rents in the Knoxville metro area rose 3.9% from the previous year in the fourth quarter of 2023. This deceleration is expected to continue over the next year, with apartment rent growth forecasted to slow to an average of 3.1% in 2024.
- Knoxville’s apartment occupancy rate declined throughout 2023 but nonetheless remains among the highest in the country. Occupancy is expected to continue falling as new units become available, with the occupancy rate forecasted to decline to an average of 96.4% in 2024.