Happy New Year! As we close the book on 2025, the Knoxville and East Tennessee real estate markets are telling a fascinating story of normalization, returning balance, and new opportunities.
If 2025 was the year the market took a breath, 2026 is shaping up to be the year it finds its footing—especially with major news regarding mortgage rates hitting the headlines just yesterday.
Here is your comprehensive breakdown of the December 2025 numbers, a full-year review, and my top predictions for what lies ahead in 2026.
The Big Picture: Knoxville vs. East Tennessee
Overall, 2025 moved us toward a more balanced feel. Inventory is up, homes are taking longer to sell, and buyers finally have room to negotiate. However, the city and the region are behaving differently.
Knoxville: Strong Finish, Softening Prices
Knoxville had a dramatic finish to the year.
- Sales: Up 12.5% year-over-year in December.
- Inventory: Skyrocketed by 31.6%.
- The Surprise: Despite the activity, pricing softened. The median sold price dipped 5% in December to $380,000.
Knoxville remains a tighter market than the region (2.9 months of supply), but the pricing dip suggests sellers are adjusting to the new reality.
East Tennessee: Building Momentum
The broader region is showing signs of a very strong start to 2026.
- Pending Sales: While Knoxville pendings were up 6.1%, East Tennessee’s pending sales jumped 19%.
- Balance: The region sits at 4.4 months of supply, making it a more balanced environment where buyers have genuine leverage.
Surrounding County Breakdown (Data Cards Below)
Real estate is hyper-local. To understand where the market is going, we have to look at the specific counties we serve. Here is how the numbers shook out for December and the full year of 2025.
Roane County
Roane is seeing a surge in activity, likely driven by spillover demand from Knoxville and lake-access lifestyle buyers.
- The Data: Inventory is up 23.6% and pending sales jumped 14% in December.
- Pricing: You might see a headline that prices jumped 25% in December, but don’t let that fool you. That is likely a “mix shift” (more expensive homes selling that month). The full-year appreciation is a steady, modest 3.17%.
- The Takeaway: Roane is catching demand. Expect moderate appreciation and solid traffic in 2026.
Knox County
Knox County, the metro anchor, is showing clear signs of normalization.
- The Data: Inventory is up significantly—nearly 29% year-over-year in December, with pending sales also up almost 10%.
- Pricing: Despite the increased options and returning buyers, price growth is mild: median sales price rose just under 2% in December, and the full-year gain was just above 2%.
- The Takeaway: This suggests a market that’s regained balance after the ultra-competitive years, with more choices for buyers and steady, sustainable price trends. Knox is still the area’s bellwether—more inventory, more buyers coming back, but prices are stabilizing rather than surging.
Anderson County
Anderson is the “Supply Leader” right now.
- The Data: Inventory jumped 37.4% in December—the largest increase in this group.
- Pricing: Prices held up (up 3.92% in Dec), but full-year growth was only 1.22%.
- The Takeaway: Supply is rising faster than demand here. If rates drop, Anderson has the inventory to absorb buyers without instantly turning into chaos. It is currently a very buyer-friendly market.
Loudon County
Loudon remains the higher-priced, hybrid market catering to move-up buyers and retirees.
- The Data: Pendings were up 15.7% in December, showing strong demand.
- Pricing: The median price sits at $497,000.
- The Takeaway: Loudon is payment-sensitive. Turnkey homes sell well, but dated or oddly located homes are sitting. Expect a “split market” in 2026 where condition dictates success.
Sevier County
Sevier is our most unique animal due to the investment and second-home dynamic.
- The Data: Pendings were up a massive 22.74% in December.
- Pricing: Full-year price growth was modest at 2.22%.
- The Takeaway: This market is highly sensitive to interest rates. If rates stay low, Sevier could re-accelerate quickly, but pricing will depend heavily on investor appetite.
Blount County
Blount is the “Sleeping Giant” that just woke up.
- The Data: Pending sales surged 38.8% in December—the biggest jump in the region.
- Pricing: Prices remained flat (up roughly 1%).
- The Takeaway: This is a classic sign of a heating market. Demand is surging, but buyers still have enough negotiating room to keep prices from spiking. If this momentum carries into Spring, expect a faster sales pace.
Community Spotlights: Farragut, Lenoir City, & Tellico Village
(Data Cards Below)
- Farragut: Still supply-constrained. Sales were up nearly 47% in December. If rates drop, Farragut will feel it through competition.
- Lenoir City: Acting like a healthy, balanced market. If rates drop, Lenoir City will feel it through affordability, as more buyers will qualify for loans.
- Tellico Village: A lifestyle market. 2025 was much more balanced than 2024. If rates drop, Tellico will feel it through momentum and a strong Spring start.
The Game Changer: Mortgage Rates Drop to 5.99%
Just yesterday, we received major news: President Trump announced a push for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities.
The market reacted instantly. The 30-year fixed rate dropped to 5.99% today.
This is the first time we have seen a rate start with a “5” since 2023. This is a massive psychological barrier. Whether you are buying, selling, or refinancing, this changes the math and the mindset heading into 2026.
5 Predictions for the 2026 Housing Market
Based on the 2025 data and this new rate environment, here is what I expect:
- Buyers Will Re-Enter the Market: It’s not just about affordability; it’s about confidence. At 5.99%, buyers who have been on the sidelines will return.
- Pendings & Closings Will Improve: East TN already has pending momentum. Lower rates will convert those contracts into closings.
- Inventory Won’t Vanish: We have more inventory than a year ago. Even with higher demand, I don’t expect the shelves to clear overnight.
- Prices Will Stabilize: The price softening we saw in December (especially in Knoxville) should level out. We aren’t going back to double-digit appreciation, but we should see steady, modest growth.
- The “Split Market” Continues: Even with lower rates, buyers are picky. Updated, move-in-ready homes will fly. Overpriced or dated homes will still need price cuts.
The Bottom Line
2025 was a year of normalization. 2026 looks like a year of opportunity.
If rates hold at these levels, the pace of the market is going to change quickly. Strategy matters now more than ever. If you are thinking about buying or selling this year, let’s start planning now so you can take advantage of this shift.
Have questions about your specific home or neighborhood? Reach out to Cornerstone Realty Associates today.
