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Investing in rental property can be a lucrative undertaking, provided that you choose to do it in the right place. There's always the question of how you do that reliably, though. realistically, you can't foresee the outcome of any investment. If people could, then they would never lose.
Since that's not possible, however, you have to do the next best thing, which is using the information available to ensure that the decisions you make are the right ones.
The data provided here is meant to help you decide if Knoxville, Tennessee is the place for you to invest. From home price growth to understanding fundamental market forces, and more, doing your diligence is non-negotiable as an investor.
Median Home Sold Price and Listing Price on the Market
Knoxville showed an increase in its median listing home price. The figure in April 2023 stood at $399,900, which is an increase of 17.7% year on year. With the prices going up, it men's that the state of things is leaning more on the side of a seller's market.
Note that the median home sold price is $351,500. There's a sale-to-list price ratio of almost 100%, which means sale prices and list prices are very closely aligned.
Is This a Competitive Housing Market?
There's no doubt that buyers are not the ones with the power over home sales in Knoxville based on the current state of things. That's because demand is higher than supply, which makes the landscape competitive by default.
Of course, the said demand is a big part of the upward movement in home prices.
Factors That Affect the Real Estate Market in Knoxville
Whether the market will experience moderate growth, significant growth, or no growth at all is influenced by several underlying factors.
The first of these is mortgage rates. Even if home prices are not prohibitive, the monthly requirement that a mortgage will impose speaks to how affordable the home is too. The Fed has adopted an interest rate hike strategy to battle inflation. This has created upward pressure where rates are concerned, pricing many people out of the housing market.
Next, there are demographics. Groupings such as race, income, and more can tell you what movements to expect. The onus is on you to understand favorable demographic trends and less favorable ones to understand how you should adjust your business interests with them.
The economic state is another big one, as it speaks to the cost of goods, GDP, income, etc., all of which can determine the feasibility of buying a house in Knoxville.
Government policies are also good to mention here. There could be subsidies or tax breaks, for example, which will feed into how attractive it is to buy a house.
Knoxville Housing Market Statistics
The Knoxville Area Association of Realtors surveyed the state of the market for Q1 2023 to gain an understanding of what it looks like. Here's a look at some of the findings.
Both buyer and seller traffic have seen a downward move. Respondents to the survey used to collect the data for the most part anticipate buyer traffic to fall.
There was an average of 2.2 offers received on houses that saw closed sales. While this wasn't different from the previous quarter, it is a long way from the six offers that would've been received in Q1 2022.
Houses in Knoxville are spending an average of 42 days on the market before they are sold, which is a decrease from previous months indicating that houses are at least selling faster.
1,881 houses are available to be sold in the city, with one week even seeing 348 new listings entering the market.
The Knoxville Housing Market Forecast
The Knoxville Area Association also looked at what is expected to happen within the market going forward. Undoubtedly, there has been an unprecedented boom in the last two years. This is expected to be followed by less growth.
While there are factors such as migration patterns and demographics that played into this, some of the market moves were influenced by pandemic factors, which are now having a much smaller influence considering the return to normalcy.
Even with the pace of things slowing down, it still stands above historical averages. In Q3 2022, the Finance Agency House Price Index reported an 18.3% increase in home prices in Knoxville's metropolitan area.
By the end of 2023, the expectation is that home sales will fall somewhere between 10% and 12%. There is limited housing inventory, which is expected to continue to be the case. If so, prices are going to be going up, which will naturally hurt demand.
All of this is simply a period of stabilization following the previous years where different factors caused things to get out of control.
What Does the Rental Market Look Like?
As a potential rental property investor, it's understandable that this would interest you. There has been high rent growth for some time in the city and that continues to be the case. Compared to the previous year, Q3 2022 saw rent going up by 19.6%. For reference, national rent growth stands at a rate of 10.5%.
For 2023, experts have rents forecasted to increase by about 4% compared to 2022.
The rental occupancy rate skyrocketed to its peak in Q4 2021, standing at 98.86%. 2023 is expected to see a 96.5% average. While this represents a decline, such a rate is still a good indication for any potential landlord.
Wrapping Up
Knoxville, Tennessee could be a great place for your next rental property investment, especially considering that things are expected to stabilize. If nothing else, all indications point to strong rental market performance, which means you should see a return on your investment.
Frequently Asked Questions
Will the Knoxville Housing Market Crash?
No. While things will slow down to stabilize, there's no expectation of a crash being on the horizon.
Is Investing in the Knoxville Housing Market a Good Idea?
Yes. As someone interested in rental property, the market's growth and occupancy rates are reasons to invest.
What Do the Landlord-tenant Laws Look Like?
Knoxville has a landlord-friendly environment, as the litigation is more favorable to the property owners.
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