Knoxville’s real estate market has been blazing hot for at least the past year.
Kanika White, a real estate agent for Keller Williams Realty, said it’s been a wild ride.
“I’ve been in the housing industry for almost 20 years, I’ve never seen the market like this,” White said. “It’s either a good time to buy or it’s a good time to sell. And right now it’s both.”
But signs of change are starting to show in Knoxville and around the country.
As the market shifts and mortgage interest rates rise, here’s what both buyers and sellers can expect to see for the second half of 2022.
Knoxville’s housing market is cooling ever so slightly
While the market is still incredibly hot, White said it is cooling off. But not enough to significantly change the landscape.
Home prices have been dropping slightly, with more listings staying on the market slightly longer. Instead of hours, homes might go unsold for days or even weeks.
This is largely due to rising interest rates.
At the end of 2021, 30-year fixed mortgage rates were at an incredibly low rate of 3.11%, according to Knoxville Area Association of Realtors governmental affairs and policy director Hancen Sale. However, those rates have been staying around 5.25% over the past month.
To put it into context, that’s the highest in more than a decade but still relatively low, historically speaking.
Sale said sharp interest rate increases are not common, and there have only been a few similar instances.
“Higher interest rates almost always weigh heavily on home sales,” Sale told Knox News in an email. “I expect sales will begin slowly trending downward and eventually stabilize at a moderate level.”
When the COVID-19 pandemic began in 2020, White said interest rates were lowered to keep the market stable. Now they are going up, but are still relatively cheap compared to prepandemic market.
“There was a time when interest rates were 12, 14, 15 even 18%,” White said. “So now, right at around 4 or 5 percent, it’s still really, really cheap to borrow money for mortgage.”
Over the past three years, Realtor Jonathan Desai said potential buyers have been told that interest rates are at an all-time low and now is the moment to buy. However, rates have gone up faster than expected, making them feel higher than they actually are. In the big picture, it’s still inexpensive to get a loan.
“Now we’re going back to a healthy market,” Desai said. “It’s not going to shift one way or another. It’s just getting healthy.”
Knoxville home listings on the rise
In April 2022, there were 2,675 new listings on the market, according to data from the Knoxville Area Association of Realtors. Back in April 2021, there were 2,500.
Over that same month-to-month comparison, the amount of sales went down from 1,971 in 2021 to 1,867 in 2022.
While many families hunkered down during the pandemic, more are willing to take a chance on moving this year. And they say now is the time.
“A majority of homeowners planning to sell this year indicated that they aim to list in the next six months, with almost 10% having already placed their properties on the market,” according to the Spring 2022 Home Sellers Report from realtor.com.
Generational shifts come into play, too. Baby Boomers have decided to retire and downsize. On the flip side, the country’s largest age demographic, the millennials, are hitting the stage in life where they need bigger homes to accommodate their growing families, the report says.
Why homes are taking longer to sell
As interest rates go up, buying power is lowered and buyers are priced out of more homes because their monthly payment would be over their budget. Higher rates also affect how much buyers can offer over the listing price.
Desai said tighter budgets factor in why homes stay on the market a little longer.
“We are seeing houses on the market for a week, maybe two weeks,” Desai said. “They’re also not going for insanely over asking as a result.”
Rather than going for almost $50,000 over asking price in many cases, Desai said he sees houses selling for about $10,000 over asking in the next few months.
The median home price as of April 2022 was $325,000, according to Knoxville Area Association of Realtors data. In April 2021, the median price was $260,000.
More inventory and more days on the market is a good sign for buyers.
Ryan Levenson, the Knoxville Area Association of Realtors 2022 president-elect and RE/MAX Preferred Properties principal broker, called the market has created a “feeding frenzy” in the recent past. With supply so limited and demand so high, Levenson said people were at a point where they’d buy a house as long as it had a roof.
“More inventory means there’s less demand,” Levenson said. “The market will be slowing down. Days on the market will become longer when people have more to look at.”
But Levenson said houses under $500,000 will remain relatively hot while the market for higher-end houses will cool down. As someone who mostly sells houses under $500,000, he said those are only on the market for about four days right now.
Don’t wait, buy a home now
Some buyers are waiting for prices to drop and for the housing market’s bubble to burst like in 2008. But the truth is, there’s no bubble to burst this time. Unlike 2008, the market is driven by low supply and high demand rather than poor lending standards, according to Knoxville Area Association of Realtors’ 2022 State of Housing report.
If Knoxville prices are too high, Levenson suggests going further away to places like Kingston. White said that buyers can still find a house under $200,000 in a good neighborhood with good square footage in areas outside of the city’s core.
“Definitely look outside those areas,” White said. “Go out a little bit further, maybe 30-45 minutes, even an hour sometimes and you will be able to find a beautiful home at a very affordable price.”
But no matter where you are looking, Desai, Levenson and White all agree that it’s better to get into the market sooner rather than later.
“My advice is to not wait. if you need a house, buy a house,” Levenson said. “Everybody’s always waiting for something to happen in real estate, and the problem with that is no one can predict it.”
This article originally appeared on Knoxville News Sentinel: Knoxville home for sale: Find more inventory in second half of 2022