A Strong Finish to the Year and What It Means Going Into 2026
The Greater Knoxville housing market closed out 2025 on a surprisingly strong note. This time of year is typically a slower month for real estate, but it delivered a surge in activity that caught many people’s attention and offers some important clues about where the market may be heading in 2026.
Here’s what the latest numbers show, and what they mean if you’re thinking about buying or selling a home this year….
Home Sales Jumped to End the Year
Home sales in Greater Knoxville were up 15.1% compared to last year, making it one of the strongest months we’ve seen in recent years.
Much of this momentum followed a brief dip in mortgage rates in early December, which sparked renewed buyer interest. Even though rates didn’t stay below 6% for long, the confidence boost carried through the rest of the month.
Home Prices Remained Stable
The January median sale price for Knox County was $385,000, which was slightly lower than a year ago.
What this means:
Despite strong sales activity, prices have largely leveled off. This stability is a sign of a market that’s finding its footing after several volatile years.
More Homes on the Market, But Still Not Enough
Total housing inventory increased 18.7% year over year, giving homebuyers more options than they had last year.
At the same time, just half of all homes went under contract in 38 days or less, compared to 30 days the year before.
What this means:
Homes are still selling, but buyers are taking more time to evaluate their choices. This is closer to a “normal” market pace and a far cry from the extreme seller market we experienced in 2021 and 2022.
Are Homes Still Selling Over Asking Price?
Yes, but not nearly as often as before…
37.8% of homes sold at or above asking price
17.5% sold for more than asking
6.1% sold for at least $10,000 over asking
2.4% sold for $25,000 or more over asking
The sale-to-list price ratio held steady at 98.3%, similar to last year.
What this means:
Well-priced, desirable homes can still sell for top-dollar, but bidding wars are no longer the default experience.
New Construction Is Holding Steady
New construction made up 13.6% of all home sales, unchanged from last year.
One notable trend…
In December, the median price of new construction was $360,000, compared to $407,000 for existing homes.
Buyers Are Choosing Smaller Homes
Buyers are increasingly prioritizing efficiency and affordability.
The average square footage of homes sold dropped 2% over the year
The median home size in December was 1,742 square feet, below the traditional 1,800-square-foot “starter home” benchmark
What this means:
Buyers are adjusting expectations and focusing on what fits their budget and lifestyle, rather than simply buying the biggest home possible.
Fewer Cash Buyers, More Balance
Cash purchases fell to 21% of total sales, down from 28% last year. At the same time, out-of-state migration has slowed, and wage differences between new movers and local buyers are narrowing.
What this means:
The market is slowly becoming more accessible for buyers who need financing, rather than being dominated by cash offers.
A Split Market Is Emerging
Higher-priced homes in established neighborhoods often sit longer because buyers at that price point have more options and flexibility.
Attainably priced homes are in short supply and tend to move quickly, sometimes with added builder incentives to bridge affordability gaps.
Looking Ahead to 2026
Home sales finished 2025 up 4.7% overall, marking only the second consecutive year of growth after several years of decline. While the market hasn’t fully returned to pre-pandemic inventory levels, signs of stabilization and balance are becoming clearer.
The big takeaway:
The Greater Knoxville housing market is moving toward a healthier, more sustainable housing market, but limited supply, especially at lower price points, remains the biggest challenge.
