East Tennessee Housing Market Update: A Strong Start to 2026
The Knoxville housing market is off to a promising start in 2026, showing clear signs of improvement compared to last year. A major driver behind this momentum is improving affordability for buyers, largely due to falling mortgage rates.
At the end of February, mortgage rates dipped below 6% for the first time in more than three years. This shift has already had a noticeable impact. Both mortgage applications and home sales have increased compared to last month and the same time last year, signaling renewed buyer activity.
Sales Are Picking Up
In January 2026, home sales across East Tennessee rose 8.4% compared to January of last year and 6.4% from December, continuing a positive trend that began late in 2025.
Despite the increase in activity, home prices remained stable. The median sale price held steady at $385,000, unchanged from a year ago. Stable pricing, combined with lower interest rates, has improved overall housing affordability.
Inventory Is Growing
Housing inventory has started to improve, with the number of homes available for sale increasing 16% compared to last year. While this is a positive development, supply remains limited in the most affordable price ranges.
As of February 1, only about 25% of available listings were priced at $330,000 or below, which is considered the affordability threshold for a family earning the area’s median income. This means that home buyers looking to purchase “starter homes” are competing for a relatively small number of affordable listings.
Homes Are Taking Slightly Longer to Sell
Homes are still selling, but buyers are taking a bit more time to decide than last year. The average days-on-market for listings in Knox County has almost doubled since last year.
That said, competitive offers are still happening, but slightly less frequently:
34.9% of homes sold for the asking price or higher
14.7% sold above the asking price
5.4% sold for at least $10,000 over asking
2.4% sold for at least $25,000 over asking
The sale-to-list price ratio averaged 98.1%, only slightly lower than 98.5% last year, showing that many sellers are still receiving close to their asking price.
New Construction Activity
New construction accounted for 13.5% of total home sales, slightly down from 14.5% last year. While builders remain active, new homes have not yet filled the gap in affordable inventory.
Knoxville Still Outperforming the National Market
Our area is outperforming many other housing markets. While local sales increased in January, existing home sales nationwide fell 8% from the previous month and 4% compared to last year.
Lower mortgage rates are expected to continue helping the region. According to the National Association of REALTORS®, every 1% drop in mortgage rates allows about 14,000 additional households in the Knoxville metro area to afford the median-priced home.
What’s Ahead for the Spring Market?
If mortgage rates remain at or below 6% through the spring buying season, the Knoxville housing market could see its largest recovery since 2022. More buyers are becoming financially able to purchase homes, and if inventory continues to improve, sales activity could accelerate quickly.
For now, the biggest challenge remains the supply of affordable housing. Demand is building, but the number of affordable homes is still limited.
Overall, the year is beginning with encouraging signs: stronger sales, stabilizing prices, improving inventory, and lower borrowing costs. If these trends continue, 2026 could be a much stronger year for Knoxville’s housing market.
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