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Expert: Knoxville is no longer a real estate 'hidden gem'

An expert said the city has become an attractive place for people moving from New York and California and is even more attractive to investors.

KNOXVILLE, Tenn. — An expert of the Knoxville real estate market said prices continue to stay up, supply continues to stay low and "cash is king" in the market.

Suzy Trotta regularly reports on the area's housing market and runs a real estate company. She said that hardly anything changed over the course of a year in Knoxville, from March 2021 to March 2022. That includes almost no inventory, lots of home sales, and rising house prices.

There were small signs of change. The number of active lists increased slightly compared to March 2021, but not by a significant amount. The number of closed units was also down slightly compared to last year, but the trends almost exactly mimic what the city saw in March 2021.

"For all intents and purposes, we are pretty much following the 2021 lines, almost exactly, with a little bit of variation," said Trotta. "It's almost like we're stuck in a loop here."

In a healthy housing market, there would be six months of houses up for sale. If no additional houses were put up for sale, the number already for sale should last around six months. In Knoxville's market though, the supply would not even last a month.

Credit: Suzy Trotta

Trotta said Knoxville is not alone in seeing unhealthy trends like that — she said the supply of houses is critically low nationwide. 

She said the National Association of Realtors released data that shows most buyers need to be patient. On average, she said buyers will need to bid on three houses before their offer is accepted and they can move in. However, that is just an average.

"It could be five, it could be more, but you have to be patient," Trotta said. "There are a lot of other people looking at just that one house because it's the only one in the market for them."

While buyers bid on homes, prices are also continuing to rise. The average price of a two-bedroom home rose by around 36%, up to around $279,000. Larger homes saw similar trends, and the average price of a three-bedroom home is around $349,000.

Credit: Suzy Trotta

Trotta said that the sudden rise in prices is statistically high. Usually, appreciation is only around 6% per year, and she said she doesn't expect prices to fall. However, she says the rate that prices rise may fall soon, calling a 36% appreciation rate unsustainable.

Despite the rising price of homes, the number of cash closings accounted for around a quarter of all sales in March 2022. Buyers who use mortgages to buy a home will have a harder time closing on a house, especially if they use FHA or VA loans.

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