Residential real estate market hits growing pains

Nashville may be Tennessee’s biggest city by far, but it does not have the state’s hottest residential real estate market. That distinction belongs to Knoxville, where prices have risen by at least 21% since May of last year. This increase has outpaced Nashville, Chatanooga, the state as a whole, and the rate for the whole nation.

Some frustrated homebuyers blame the situation on out-of-city or out-of-state buyers, who they say are driving up prices. According to a 2019 report, out-of-state buyers made up 17.7% of all homebuyers in Knoxville. According to Census Bureau statistics, the median household income of out-of-state buyers was over $90,000 in 2019, while Knoxville locals  Critics claim that buyers from cities where the cost of living is higher can afford to outbid local buyers when they are in competition to purchase a home in Knoxville. This could have the effect of driving up prices for everyone.

Supply and demand

Other market analysts say the out-of-town buyer problem has been overstated. They say the price increases stem from a classic combination of high demand and low supply. Put simply, Knoxville has earned a good reputation in recent years and a lot of people want to live there, but the stock of homes has not increased to meet this new demand.

This lack of inventory has long been apparent, and prices have been rising for years, these analysts say, but the turmoil of the past 18 months has made the problem worse. New construction has started to pick up, but supply chain problems mean that prices for materials are rising.

Legal issues

In an overheated real estate market, some sellers or builders may be tempted to cut corners, and buyers may need to financially extend themselves more than they would like. In this type of environment, it’s more important than ever that homebuyers and others who engage with the residential real estate market seek out legal advice to protect themselves, their investments and their homes.