Housing market remains competitive in Knoxville
The September “Market Pulse” from the Knoxville Area Association of Realtors (KAAR) covered a lot of ground.
Home sales increased in August by 4.8 percent compared to the previous month, but are still down 5.3 percent compared to August 2021. Rising home prices and mortgage rates are pushing some buyers out of the market. The newsletter said declining affordability is the largest driver of housing moderation. However, the outlook for home prices and a competitive market remains strong.
“Market Pulse” also gave some data from the “Q2 2022 Housing Report.” Single-family home prices are around 60 percent higher than in 2019. This means typical homes on the market are more than $130,000 more expensive than pre-pandemic prices. With a 30-year fixed rate mortgage and a 5 percent down payment, people need to make $86,112 annually to afford a median-priced home.
Although there are more investors in the housing market since the pandemic, the National Association of Realtors noted in a report that they have had very little impact on home prices.
There is a growing share of mortgage applications in Knox County from majority-minority census tracts, according to KAAR. This number has been increasing since 2018.
The rental market slowed in August after several months of gains. However, effective rent rates in the Knoxville Metropolitan Statistical Area are still up 19 percent year-over-year for August. This outpaces the annual rent growth of 10.5 percent nationally, according to the newsletter. With inflation continuing to impact the market, housing costs rose 0.7 percent from July to August, according to the consumer-price-index (CPI). Housing costs make up one-third of the overall CPI.
The Federal Reserve recently approved a third consecutive rate hike. This will raise the short-term policy rate by another 75 basis points. Mortgage rates are hovering around the highest level they have been since 2008. As of September 22, the average 30-year fixed mortgage rate was nearly 6.3 percent, and is expected to remain around 6 percent in the near term, according to the newsletter.
