2026 Housing Market Outlook for Knoxville: What Sellers Should Expect

If you own a house in Knoxville or anywhere in East Tennessee, 2026 is shaping up to be a very different housing market than the last few years. Mortgage rates are expected to drift closer to (but not below) 6%, national home sales are forecast to finally rebound, and Knoxville is projected to be one of the top inbound cities in the entire country in 2026. That combination matters a lot if you’re deciding whether to sell, hold, or get creative with your property.

As a Knoxville real estate analyst, I’m watching three big forces for local homeowners: interest rates, buyer demand vs. inventory, and a historic influx of new residents into the Scruffy City. In this guide, we’ll break down what the 2026 housing market could look like—and how to use that information to make smart decisions about your house.

Why 2026 Won’t Look Like 2020 or 2022

First, a quick reality check: 2020–2022 were not “normal” housing markets. We saw ultra-low mortgage rates near 3%, multiple-offer bidding wars, and buyers waiving inspection contingencies just to get in the door. That environment is gone.

By comparison, 2024–2025 have been “stuck in neutral” years nationally—higher mortgage rates, fewer sales, and many would-be sellers choosing not to list. National forecasts from major groups like the National Association of REALTORS® (NAR) and Fannie Mae now point to a 2026 rebound instead of a crash: modestly lower rates, more transactions, and generally stable or slightly higher prices, not a fire sale.

Locally, Knoxville has stayed surprisingly resilient. In our earlier breakdown, Knoxville’s Housing Market 2025: A Seller’s Guide to Maximizing Net, Generating Cash Flow, and Protecting Equity, we saw a market that was “somewhat competitive,” with homes still selling and prices holding up even as rates rose.

Heading into 2026, the big shift isn’t a price crash—it’s a potential unlocking of pent-up demand as more buyers re-enter the market when rates feel manageable again.

Where Mortgage Rates Are Likely Heading by 2026

Interest rates are the engine under the hood of the housing market. The good news: most major forecasters now expect 30-year mortgage rates to ease somewhat by the end of 2026—but not back to 3%.

• Fannie Mae projects average 30-year fixed mortgage rates drifting down and ending 2026 around the high-5% range (roughly 5.9–6.1%).
• Mortgage Bankers Association (MBA) is more conservative, expecting rates to hover closer to the low-6% range (around 6.3–6.4%).
• NAR’s chief economist has repeatedly tied his 2026 sales rebound forecast to rates easing “around 6%,” not a return to pandemic-era lows.

In plain English: most experts see 2026 mortgage rates somewhere near 6%—a bit lower than recent highs, but still much higher than the 3% money we saw earlier in the decade.

For Knoxville homeowners, that likely means:

• More buyers can finally qualify again compared with 7–8% rates.
• But affordability will still bite, especially for first-time buyers.
• Well-priced homes in good condition will move; “wishful thinking” list prices will sit.

If you’re sitting on a low-rate mortgage now, 2026 will still feel like a “golden handcuffs” situation—selling and buying another home at 6%+ will raise your payment. That’s why many Knoxville homeowners are exploring alternatives like selling to an investor, lease-purchase, or other creative structures instead of trading one retail mortgage for another.

Will 2026 Be a Buyer’s or Seller’s Market in Knoxville?

Whether 2026 feels like a buyer’s or seller’s market in Knoxville comes down to one simple ratio: the number of homes for sale vs. the number of serious buyers.

Nationally, NAR is forecasting a roughly 14% jump in existing home sales in 2026 as rates ease and more people finally move. At the same time, inventory is expected to improve but remain below long-term “healthy” levels. That combination points toward a market that is more active than 2024–2025, but not wildly over-heated.

Here in Knoxville, a few things tilt the scales in favor of homeowners:

• We’re already a popular in-migration city (more on that below).
• Topography, zoning, and construction costs limit how fast new supply can be added.
• Many local owners still have low-rate mortgages and won’t list unless they have to, keeping the number of homes for sale constrained.

Put that together, and Knoxville in 2026 is most likely to feel like a mild seller’s market in many price ranges, especially for move-in-ready homes under roughly the mid-$300s. Higher-end properties or homes that need major work may feel more balanced or even tilt toward buyers if inventory builds.

If you want a deeper dive on the buyer vs. seller dynamic, you can also read our earlier piece, Why Is Knoxville Real Estate So Expensive?, which breaks down how limited supply and strong demand have kept local prices elevated even when rates climbed.

The 2026 Knoxville Population Surge (1.61 People In for Every 1 Out)

One of the most important—and underappreciated—factors for Knoxville homeowners is what’s about to happen with migration.

MoveBuddha’s 2026 Moving Forecast and multiple news outlets now predict that Knoxville will be the #1 “move-to” city in America in 2026, with about 1.61 newcomers arriving for every one person moving away. Local coverage from Knoxville outlets has echoed the same ratio: Knoxville at the top of the national list for inbound moves.

That matters because every person moving here needs a place to live—whether that’s buying, renting, or doing a lease-purchase. With more people coming in than leaving, it puts upward pressure on demand for both homes and rentals. Even if national prices cool or flatten, high inbound migration can keep Knoxville relatively strong compared with other metros.

For homeowners, this influx translates into:

• A larger pool of potential buyers if you decide to sell in 2026.
• More demand for lease-purchase and rental options, if you’d rather hold the property and generate cash flow.
• Continued competition in popular neighborhoods and school zones as new families arrive.

In short: Knoxville’s projected 2026 population growth is a strong tailwind for local sellers. It doesn’t guarantee top-dollar offers for every property, but it does mean your house is sitting in a market where demand is expected to increase, not shrink.

What This Means If You Own a House in Knoxville

All the forecasts in the world only matter if they help you answer one question: “What should I do with my house?” Here’s how I’d think about 2026 as a Knoxville homeowner, based on different situations.

If you’re thinking about selling in the next 6–18 months

If you’re already leaning toward selling, 2026 could be a favorable window:

• Buyer activity is likely to be stronger than in 2024–2025 as rates ease.
• Knoxville’s inbound migration could mean more showings and more offers.
• Most national experts are not forecasting a price crash; they’re expecting steady or modestly higher prices.

Your main trade-off is timing: do you list conventionally with an agent, sell direct to an investor, or explore creative terms that let you maximize your net over time? If you’d like a high-level comparison, our earlier article Knoxville’s Housing Market 2025: A Seller’s Guide is still a useful framework for 2026.

If you’re behind on payments or worried about foreclosure

For homeowners in pre-foreclosure or close to auction, 2026 is less about “timing the market” and more about using the time you still have. Tennessee’s foreclosure process can move quickly, especially once an auction date is set.

If that’s you, I strongly recommend reading our detailed guide, Knoxville Pre-Foreclosure Timeline: How Much Time You REALLY Have Before the Auction (2026 Guide). It explains the timeline step-by-step and shows when selling before the sale often makes the most sense.

In a year where more buyers are expected to be in the market and Knoxville is drawing in new residents, selling before auction—either for cash or on creative terms—may allow you to:

• Avoid the public stress of an auction.
• Protect your credit from a full foreclosure hit.
• Potentially walk away with cash instead of losing everything.

If you’re underwater or have little/no equity

Rising prices helped some owners regain equity, but others in Knoxville are still “stuck” owing more than their home is worth or having almost no equity after closing costs. If that’s you, increasing demand in 2026 might help, but it may not fully solve the math.

In these cases, a traditional listing can be risky—especially if you’d have to bring money to the closing table. A better starting point is our article What to Do When You’re Underwater on Your Mortgage in Knoxville, TN, which walks through why lease-purchase and other creative options often make more sense than trying to sell the “normal” way.

How Creative Financing Fits into a 2026 Market

One of the most powerful tools in a 6%+ rate environment is creative financing. When buyers are payment-sensitive and traditional financing feels tight, flexible terms can bridge the gap between what buyers can afford and what you, as a seller, need to walk away with.

Examples include:

• Lease-purchase (rent-to-own) structures where Tact Prudence steps in as your buyer on terms, then places an end-buyer.
• Seller financing, where you act as the bank and collect monthly payments instead of one big check.
• Subject-to or payment-takeover deals, where your existing low-rate mortgage stays in place but the payment responsibility shifts.

In a 2026 Knoxville market with strong inbound migration, these structures can attract more qualified buyers, potentially increase your net, and create monthly income instead of a one-time lump sum. For a deeper dive, browse our articles under the Creative Financing topic.

Should You Sell Now or Wait for 2026?

There’s no one-size-fits-all answer, but here’s how I’d simplify the decision as we head into 2026:

• If you’re under stress now (payments, repairs, divorce, inherited property you don’t want): waiting for the “perfect” market rarely pays off. Use the demand we’re already seeing, plus the expected 2026 lift, to explore a cash or creative offer sooner rather than later.
• If your situation is comfortable and you’re mostly trying to optimize your net: 2026 may give you a slightly larger buyer pool and more competitive offers, especially with Knoxville’s projected in-migration.
• If you’re open to creative terms: a 6%+ rate world is where creative deals shine. You may be able to keep monthly income, help a buyer get into a home they couldn’t otherwise afford, and still protect your equity.

The main risk in “waiting for 2026” is assuming that forecasts are guarantees. Interest rates, employment, and national policy can change. That’s why my advice for most Knoxville homeowners is simple: get real numbers in front of you instead of guessing.

At Tact Prudence, we can walk your property, look at your payoff, review your goals, and show you side-by-side options:

• What a fast as-is cash sale could look like.
• What a creative financing or lease-purchase structure might pay you over time.
• How those options compare to a traditional listing in a 2026-type market.

You’re never obligated to say yes. But having clear, Knoxville-specific numbers in front of you is the best way to decide whether to sell now, wait, or structure a deal that works in a 6% rate world.

Ready to see your options? Tell us a bit about your property and situation, and we’ll follow up with a no-pressure plan you can actually use—whether that’s a cash offer, a creative solution, or simply guidance on timing the 2026 market.

Click here to request your options from Tact Prudence or call/text (865) 272-2000 today.

We are real estate investors, not attorneys, CPAs, or financial advisors. This article is for informational purposes only. Before making legal, tax, or financial decisions, please consult with the appropriate licensed professionals.