Are Home Prices Dropping in Tennessee?

Real estate markets constantly evolve, reflecting economic shifts and local dynamics. Tennessee, with its growing population, has seen considerable interest in its housing market. Many are watching to determine if home prices are declining.

Current Tennessee Housing Market Snapshot

Statewide, Tennessee home prices continue to show year-over-year increases, though at a more moderate pace than in previous years. The median sale price for a home in Tennessee was approximately $383,300 in January 2025, representing a 5.2% increase compared to the previous year.

While prices are still rising, the market is showing signs of softening. Homes are spending longer on the market, with the median days on market reaching 75 days in January 2025, an increase from the previous year. Additionally, 24.2% of homes in Tennessee saw a price reduction in January 2025, indicating sellers may need to adjust expectations.

Inventory levels have also seen a notable increase. In January 2025, there were 34,580 homes for sale in Tennessee, marking a 16.3% increase compared to the prior year. This rise, coupled with a 2.7% year-over-year increase in homes sold, points to a more balanced market.

Key Economic Factors Influencing Home Prices

Mortgage interest rates play a significant role in affordability and buyer demand. As of February 2025, rates are hovering around 7%. This increase has a substantial impact on monthly mortgage payments, with estimated statewide payments rising by 61.0% since 2022. Higher borrowing costs can reduce purchasing power, leading some buyers to delay homeownership.

The balance between housing inventory and supply remains a driver of prices. Tennessee has seen a significant increase in homes available for sale. A months of supply metric was at 5 months in January 2025, suggesting a move towards a more balanced market.

Population migration continues to exert upward pressure on demand. Tennessee remains a popular destination for individuals and families relocating from other states, particularly from higher-cost areas like California, New York, and Illinois. The state’s lack of a state income tax and lower cost of living act as strong draws, contributing to sustained housing demand. This influx intensifies competition for available homes.

The state’s robust job market and economic growth also support housing demand. Key sectors like manufacturing, healthcare, and technology are experiencing growth, leading to job creation and increased buying power. Economic health and employment rates influence consumer confidence and housing affordability. This sustained activity underpins the market’s resilience, even amidst higher interest rates.

Regional Variations Across Tennessee

While statewide data provides an overview, market conditions vary significantly across different regions within Tennessee. Major metropolitan areas often exhibit unique trends influenced by local economic drivers and supply-demand dynamics. For example, in July 2025, Nashville’s median home price was approximately $478,000, showing a modest 1.1% increase compared to the previous year. Homes in Nashville generally spent around 62 days on the market.

Memphis, in contrast, experienced a slight decrease in median home prices, with July 2025 data showing a 2.0% decline to $186,000. Homes in Memphis sold relatively faster, averaging 36 days on the market in July 2025. This highlights how larger cities can follow different trajectories compared to the state average or other urban centers.

Knoxville’s housing market also presents varied conditions. In July 2025, the median home price in Knoxville was around $330,000, representing a negligible year-over-year change. However, specific sub-markets like Downtown Knoxville saw a significant 27.3% increase in median home prices, reaching $579,000 in July 2025. This demonstrates that even within a single city, localized factors can lead to diverse performance.

Chattanooga’s market has shown stronger price appreciation, with median home prices increasing by 18.6% to $380,000 in July 2025. Homes in Chattanooga typically spend between 53 and 57 days on the market. Beyond urban centers, rural areas in Middle and East Tennessee have also seen rising housing prices, as migration from urban cores expanded demand into outlying counties.

Implications for Buyers and Sellers

The current market presents both opportunities and challenges for Tennessee home buyers. Increased housing inventory and longer days on market offer more choices and potentially greater negotiation leverage. However, higher mortgage interest rates reduce affordability, meaning buyers may need to adjust budgets or consider properties in different price ranges. Buyers should secure a pre-approval and consider locking in an interest rate.

Sellers must now adopt more realistic pricing strategies given the market’s shift towards greater balance. The increased percentage of homes experiencing price drops suggests overpricing leads to longer market times. Competitive pricing from the outset is key to attracting serious buyers. While the market is no longer frenzied, many areas still experience moderate price appreciation, indicating appropriately priced properties can sell efficiently.