Why Are Houses So Cheap in Memphis?

Memphis, Tennessee, often stands out in discussions about real estate due to its notably affordable housing market. This perception of affordability is rooted in various interconnected factors that shape the local real estate landscape. Understanding these elements provides insight into why homes in Memphis are generally more accessible. This article explores the economic conditions, supply and demand dynamics, and urban development characteristics that collectively contribute to the city’s housing affordability.

Economic Factors Affecting Affordability

The economic environment in Memphis plays a substantial role in determining what residents can afford for housing. The average household earnings in the city are approximately $57,000, which influences the purchasing power of its citizens.

Memphis benefits from a diverse job market that includes major employers in logistics, healthcare, and education. Companies like FedEx, AutoZone, and International Paper contribute to a stable employment base, which supports the local economy. While the job market provides opportunities, the wage levels associated with these industries also factor into the overall housing affordability equation. Nonfarm payrolls are expected to continue growing, indicating a steady, rather than rapidly escalating, economic expansion.

The overall cost of living in Memphis further enhances its housing affordability. General expenses, excluding housing, are approximately 10% to 14% lower than the national average. This reduction in everyday costs, such as utilities (18% to 19% lower), transportation (around 11% lower), and healthcare (14% to 15% lower), provides residents with more disposable income. This lower cost of living allows residents to allocate a smaller portion of their income to basic necessities, making homeownership more attainable.

Supply and Demand in the Housing Market

The interplay of housing supply and demand significantly influences home prices in Memphis. The city’s housing inventory included approximately 3,416 homes for sale in July 2025, representing a 9.5% increase from the previous month. Single-family detached homes constitute the majority of the housing stock, accounting for over 60% of units. This consistent availability of homes, including older properties, helps to meet market demand without creating significant upward pressure on prices.

Population trends in the Memphis metropolitan area have also contributed to the housing market’s characteristics. From 2020 to June 2024, the population experienced a modest annual decrease of 0.2% due to net out-migration. While the state of Tennessee has seen overall population growth, attracting individuals from higher-cost regions, Memphis itself has experienced stable or slightly declining numbers. This slower or negative population growth directly impacts housing demand, allowing existing supply to accommodate buyers.

Migration patterns further illustrate the demand dynamics. Between May and July 2025, approximately 30% of Memphis homebuyers sought properties outside the metropolitan area, while 70% looked to remain within the region. Outbound migration, coupled with a relatively modest inflow of homebuyers from other metros (0.30% during the same period), contributes to a balanced market rather than one driven by intense competition. This equilibrium prevents rapid price escalation often seen in areas with high net in-migration.

Market activity reflects these supply and demand conditions. In June 2025, the median home price was $215,000, a 13.1% increase year-over-year. However, other data points from July 2025 indicate an average listing age of 114 days and that 60% of homes sold below asking price, suggesting a buyer’s market. This provides opportunities for negotiation, supporting the city’s overall affordability.

Urban Development and Neighborhood Characteristics

Urban development patterns and the distinct characteristics of Memphis neighborhoods play a role in shaping housing values. A notable factor is the prevalence of vacant or distressed properties, with the city’s average vacancy rate around 10.57%. Certain areas, like Downtown Memphis, exhibit higher vacancy rates, nearing 16%. These unoccupied properties can influence the market value of surrounding homes, often contributing to lower average prices across the city. The presence of vacant units can deter some buyers and investors, impacting demand in specific sub-markets.

The state of local infrastructure and public services, such as schools and public safety, also influences neighborhood desirability and property values. While not the sole determinant, perceptions and realities regarding these services can make certain areas more or less appealing to prospective homeowners. This variability in desirability across neighborhoods contributes to the wide range of property values found within Memphis.

Property tax rates are another consideration for homeownership costs. The median effective property tax rate in Memphis is approximately 1.52%. This rate is applied to the assessed value of a property, which for residential homes is typically 25% of the market value. While the city’s rate is higher than the national median of 1.02%, it is important to note that the overall median annual property tax bill in Memphis is lower than the national median.

Memphis comprises 161 distinct neighborhoods, each with varying price points and characteristics. For example, areas like River Oaks exhibit higher median listing prices, around $629,000, while Riverside offers much more affordable options, with median listing prices as low as $65,600. East Memphis and Midtown generally feature higher median home prices compared to other parts of the city. This wide range of neighborhood conditions and housing types contributes to the overall average affordability of the Memphis housing market, allowing diverse economic segments to find suitable housing.