As we progress into 2025, one of the most pressing topics in the real estate market remains mortgage rates and their influence on both buyers and sellers. Let’s explore what leading experts and recent economic indicators are saying about the trajectory of mortgage rates this year, and how these trends could shape the real estate market nationally and here in Knoxville, TN.
National Trends: Where Are Mortgage Rates Headed?
According to recent analyses from Freddie Mac and the Mortgage Bankers Association (MBA), mortgage rates in 2025 are expected to stabilize after the significant fluctuations seen in previous years. The Federal Reserve’s efforts to curb inflation throughout 2023 and 2024 have shown progress, with inflation rates trending downward. However, mortgage rates remain elevated as broader economic factors influence the market.
As of late January 2025, 30-year fixed mortgage rates are averaging around 7.27%, slightly above the 6.5% to 7.0% range seen in late 2024. Economists project rates may gradually decline throughout the year, potentially nearing 6.3% by year-end, assuming inflation continues its downward trend and the labor market remains resilient. Nonetheless, uncertainties around global economic conditions and Federal Reserve policies still linger, adding a degree of unpredictability to the mortgage market.
Broader Impacts of Mortgage Rates
The movement of mortgage rates directly impacts affordability for homebuyers and selling strategies for homeowners. Higher rates typically reduce buying power, as monthly payments for the same loan amount become more expensive. This can lead to slower home sales and a more selective buyer pool. On the flip side, stabilizing or declining rates can rejuvenate demand and encourage more transactions.
Nationally, we’re seeing some markets adjust to these conditions by moderating home price growth. According to CoreLogic, the average home price appreciation slowed to 4% annually in 2024, compared to double-digit increases in prior years. If mortgage rates stabilize as expected, this could create a balanced market with opportunities for both buyers and sellers.
Local Outlook: Knoxville’s Real Estate Market in 2025
In Knoxville, the real estate market has shown remarkable resilience despite national trends. The area’s relative affordability, coupled with its strong job market, low taxes, and quality of life, continues to attract buyers from across the country. However, higher mortgage rates in recent years have had a noticeable impact on the pace of home sales and inventory levels.
As of December 2025, Knoxville’s housing inventory remains tight at 1.9 Months Supply of Inventory, compared to the balanced market benchmark of 6 months. Despite higher rates, demand for homes in sought-after communities like Farragut, Hardin Valley, Choto, and Northshore remains robust, driven by out-of-state relocations.
The Sold with Sinclair team anticipates increased activity in Knoxville’s real estate market starting in February, as more listings come onto the market and buyers begin preparing for anticipated moves in May and June.
What This Means for You
If you’re considering buying or selling a home in today’s market, understanding how these trends impact your position is key.
For Buyers: If you’re a cash buyer, current conditions may work to your advantage, as you’ll bypass the challenge of higher mortgage rates. For financed buyers, while today’s rates may seem daunting, it’s worth considering the potential long-term benefits. For instance, buying now at a higher interest rate on a $400,000 home with a 7.27% mortgage rate may cost an extra $300 per month compared to a 6% rate. However, if home prices rise by 5% over the next year as inventory stays low and rates drop, waiting could mean paying $20,000 more for the same property—potentially offsetting any interest savings.
For Sellers: Inventory in Knoxville remains historically low, meaning that well-priced and well-marketed listings continue to perform strongly. Even with fewer buyers in the market, competition among those actively searching can result in multiple-offer scenarios. February and March are particularly advantageous months to list, as our research indicates these months typically see the highest sold-price-to-list-price ratios and the lowest days on market. By positioning your property strategically, you can maximize its value even in a more challenging environment.
No matter your position, expert guidance can help you navigate the current market conditions to your advantage. Reach out today to discuss your real estate goals!
