Why is Knoxville rent still so high?
Simply put, it's a supply and demand issue that's still working itself out.
There are thousands of apartment units under construction in the Knoxville area, but until those come online, rent prices likely won’t change.
Data from East Tennessee REALTORS (ETR) newest Market Pulse Report shows effective rents in the Knoxville metro area increased 9.6 percent from the previous year in the second quarter of 2023, compared to 2.3 percent growth nationally. That means Knoxville rents are increasing five times faster than most of the country.
It’s a problem plaguing the majority of renters, and it’s evident in the headlines.
WVLT reports renters at one complex in North Knoxville are facing homelessness after a new landlord doubled their rent prices.
The Knox News Sentinel reports Knoxville mayoral candidates were “peppered with questions about how they would begin to solve the rental rate problem” at a recent League of Women Voters forum.
So what’s the answer?
ETR reports the local apartment market is poised to soften over the next year as a wealth of new inventory becomes available in close proximity. There were 3,214 units under construction in the second quarter of 2023, an all-time high for the Knoxville metro area.
New supply is likely to outpace demand, slowing the rate of rent increases and leading to lease-up challenges, especially for high-end Class A units in more urban areas (which represent a sizable share of new supply). Despite these short-term challenges, demand for multifamily units is likely to stay strong over the long run given favorable demographic trends and economic conditions in the region.
ETR’s Market Pulse Report also gives the following economic data for the local housing market for home buyers and sellers:
- By the end of July, housing inventory was essentially unchanged from a year ago largely due to fewer new listings, which are down more than 25 percent from the previous year.
- Following a brief pause, Federal Reserve officials lifted interest rates for the 11th time since March 2022 in July, bringing the benchmark federal funds rate to the highest level in 22 years.
- Knoxville was among a handful of East Tennessee cities on GoBankingRates‘s list of housing markets poised for the most stable growth in 2023.
- Knoxville ranked No. 12 on the latest WSJ/Realtor.com Emerging Housing Markets Index, which identifies U.S. cities with both a strong housing market and a thriving economy.
You can subscribe to receive ETR’s free monthly Market Pulse Report here.