There are a lot of reasons to want property in Tennessee. For starters, Nashville is one of the cities in America whose reputation has skyrocketed in the past several years, becoming a commercial and cultural hotspot. Memphis is famed for its incredible BBQ cooking and its blues and rock and roll history. Outside of the main urban centers, Tennessee’s Smoky Mountains and the Appalachian Trail are two of the most stunningly beautiful places in the country. Long story short, it is a desirable place to live with a lot to offer.
For the most part, Tennessee is an affordable state to buy a home. According to Neighborhood Scout, 35.7% of the homes in the state are valued between $137,694-$275,290. The median home value in the state is $215,040. This affordability is a big part of the draw for people looking to move to Tennessee, but it underlies a different issue: Home prices in Tennessee are rising. While it may not be as significant as some parts of the country, the price of real estate in many areas of Tennessee is steadily climbing.
Let’s look at some of the major trends in the Tennessee real estate industry right now and see how the past year has impacted the market.
Increased Demands Fueling Nashville’s Hot Market
Nashville is one of the trendy cities for those looking to relocate. There is a lot of talk around people relocating from the biggest cities, like Los Angeles, New York, and San Francisco, to newer, emerging markets, like Austin, Nashville, and San Antonio. The trends seem to back this talk up as more than just media chatter.
According to a report from Norada Real Estate, Nashville’s market is flaming hot right now. Increased demand, including interest from out-of-state buyers, is fueling a supply crisis as homes are swept off the market. Norada reports that Tennessee’s lower taxes and less stringent response to the pandemic are leading many to head to the city, with realtors reporting a record number of out-of-state purchases. Nashville’s newfound status as a tech hub and entrenched status as an entertainment hotspot aren’t hurting it either.
According to the same report, the median sales price for a single-family home in Nashville is up to $425,000, increasing 21% year over year. This is a massive increase, and it coincides with and is likely caused by a housing shortage. There are currently 4,732 units for sale in Nashville, a 23.6% decrease year-over-year.
Knoxville an Emerging Market
Located in Eastern Tennessee, only an hour’s drive away from the Great Smoky Mountains, Knoxville has typically been a secondary market in Tennessee. While Nashville and Memphis are the two biggest cities in the state, Knoxville is now seeing a rapid increase in demand and residents as affordable real estate is snatched up and prices rise.
According to a report by abc6, Knoxville’s market has been operating at an unprecedented pace throughout 2021. The median price of a home in November 2021 was up 22% from November 2020, rising to a median sales price of $295,000. Even as the prices of homes rise, buyers’ willingness to spend accordingly does too. The same report showed that 38% of the Knoxville homes sold above the asking price in November, with 20% at least $10,000 above the asking price.
The report by abc6 cited a finding by the National Association of Realtors that nearly 10,000 people moved to the Knoxville metro area in 2020, adding a pool of buyers to the region. This has continued throughout 2021 and into 2022. Buyer demand for Knoxville is all of a sudden extremely high, and there is not enough supply to meet it. That contributes to increased competition and buyers paying way over the asking price.
Looking Ahead to 2022
Tennessee is in a similar situation to many other states across America. One of the major impacts of the pandemic is that it has caused many to reassess their living situation and look outside of the traditional housing markets. States like Texas, Florida, and Tennessee are some of the big beneficiaries, as people from big cities move to states with lower tax rates and more affordable real estate.
Tennessee has seen many head to the state, and cities like Nashville and Knoxville have extreme sellers’ markets right now. The low inventory and increased demand are fueling price rises. While the state remains affordable, these changes are making it less so. While predicting the future is hard, demand for Tennessee real estate will likely remain high. If supply can’t meet that demand, prices will continue to climb.
