In the ever-evolving realm of real estate, 2023 proved to be a year of surprises, defying predictions made by housing economists across the nation. From unexpected dips in home sales to record-breaking high prices and soaring mortgage rates, the market experienced unprecedented shifts, creating what many are calling the least affordable housing market in a generation.
As we step into 2024, what can Knoxville, TN, and its prospective homebuyers expect? Will the trends of the past year continue, or is there hope for a more stable and balanced market? Let's delve into the key insights and forecasts for Knoxville's real estate landscape in the coming year.
1. Mortgage Rates: A Slight Descent
One of the most surprising aspects of 2023 was the surge in mortgage rates, reaching nearly 8%, the highest level in 23 years. However, experts anticipate a gradual improvement in 2024. Mortgage rates have already fallen for nine consecutive weeks, with projections indicating a further decline, though not expected to dip below 6%. This shift is attributed to the Federal Reserve's efforts to rein in inflation through interest rate hikes, impacting housing demand.
2. Affordability on the Horizon
Knoxville, like many other cities, faced a housing affordability crisis in 2023, with homebuyers spending over 40% of their earnings on mortgage payments. The anticipated drop in mortgage rates in 2024 is expected to bring relief, making homeownership more accessible. As rates decrease, more homeowners are likely to list their properties, increasing inventory and stabilizing prices.
While significant drops in home prices may not be on the horizon, forecasts suggest a slowdown in the rate of increase. Zillow predicts home values to hold steady, while Realtor.com forecasts a modest drop of 1.7% in 2024. NAR, on the other hand, anticipates a slight increase in the median home price to $389,500, reflecting a 0.9% uptick from the previous year.
3. Rising Home Sales in 2024
The anticipated improvement in inventory and a slight decrease in mortgage rates are expected to boost home sales in Knoxville. Lawrence Yun, Chief Economist at NAR, forecasts a 13.5% increase in existing home sales, reaching 4.71 million units in 2024. Additionally, a continued rise in new home construction is expected to contribute to increased inventory, with 1.48 million housing starts projected for the year.
4. Regional Markets to Watch
Knoxville stands among the cities poised for growth in 2024. According to NAR, markets in southern states, particularly Austin, Texas, are expected to outperform others due to faster job increases. Additionally, metro markets in the Midwest, including Dallas and Fort Worth, Texas; Dayton, Ohio; Durham and Chapel Hill, North Carolina; Harrisburg, Pennsylvania; Houston; Nashville, Tennessee; Philadelphia; Portland, Maine; and Washington, DC, are predicted to experience gains as well.
5. Local Insights: Knoxville's Real Estate Snapshot
A recent home sales report for November 2023 in East Tennessee provides a local perspective. While home sales declined slightly, the median home sales price increased by 10.8% from the previous year. Total housing inventory saw a 3.5% increase, offering more options for buyers. However, the Sale-to-List Price Ratio declined, indicating potential negotiation opportunities for buyers.
6. Rent Trends and Zoning Changes
In addition to home sales, Knoxville's rental market saw a 3.72% increase in apartment rents in November 2023. The average rent for a 3-BR single-family home in Knoxville was $2,235, up 3% from the previous year. Notably, a poll released by East Tennessee REALTORS® indicates strong support for Mayor Indya Kincannon's plan to amend zoning laws, allowing for more diverse housing options.
As Knoxville navigates the dynamic real estate landscape of 2024, the key will be adaptability. Homebuyers and sellers alike should stay informed about market trends, mortgage rate changes, and local developments to make well-informed decisions in this era of incremental change.
*Disclaimer: The information presented is based on forecasts and reports available as of the date of this blog post and is subject to change based on evolving market conditions.*