Employment Growth and a Balanced Housing Market in Knoxville, TN
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
The Knoxville HMA is in eastern Tennessee and includes the nine counties of Anderson, Blount, Campbell, Grainger, Knox, Loudon, Morgan, Roane, and Union. The principal city, Knoxville, sits in the Tennessee Valley on the Tennessee River and is the county seat of Knox County. The Knoxville HMA has an estimated population of 886,800, of which an estimated 53 percent live in Knox County. A recent Comprehensive Housing Market Analysis on the Knoxville HMA highlights the economic and housing market activity in the area.
Employment growth led by leisure and hospitality and manufacturing sectors
Over the past year, nonfarm payrolls increased by 2,700 jobs, or 0.7 percent, to 397,600 in the Knoxville HMA; this increase was less that of the previous year, during which payrolls rose by 4,400 jobs, or 1.1 percent. The unemployment rate over the past year was 3.2 percent in the Knoxville HMA, down from 4 percent a year prior.
The leisure and hospitality sector led all other sectors in payroll growth, increasing by 1,900 jobs, or 4.6 percent, over the past year. The mining, logging and construction sector, however, saw the highest rate of growth in employment, increasing by 6.7 percent, or 1,200 jobs. The report attributes the high growth rate in the construction subsector to the $125 million development of three hotels in downtown Knoxville. Once completed, the development will further increase employment in the leisure and hospitality sector.
The manufacturing sector also experienced growth, adding 1,300 jobs for a 3.4 percent increase in employment. The manufacturing sector accounts for 10 percent of employment in the Knoxville HMA, which is higher than the national average of 8 percent. One manufacturer, DENSO Manufacturing Tennessee, is undergoing a $1 billion expansion that will add 1,000 jobs by 2020.
Not all employment sectors experienced growth. Employment declines occurred most notably in the education and health services sector, which reduced employment by 1,300 jobs, as well as in the wholesale and retail sector, which lost 500 jobs, and the government sector, which lost 400 jobs.
The government sector is the HMA’s third-largest employment sector; with 3 of the area’s 10 largest employers, it accounts for 15 percent of total employment in the Knoxville HMA. The U.S. Department of Energy, with 13,000 workers, is the largest employer in the area. The HMA is also home to the University of Tennessee–Knoxville, the main campus of the Tennessee university system. The university employs 6,700 and its athletic programs attract significant numbers of tourists.
Over the next 3 years, payrolls are expected to grow at an estimated rate of 0.6 percent per year, which is a slower rate than recent job growth. Job growth is anticipated to be strongest in the leisure and hospitality and manufacturing sectors.
Balanced sales and rental markets
The sales market is balanced, with an estimated 2.4 percent vacancy rate. Over the past year, total home sales rose to 22,200, which is an increase of 4 percent over the previous year. The average sales price for new and existing homes rose 5 percent over the past year to $187,600.
Over the past year, 3,324 single-family homes were permitted, up from 2,975 in the previous year. Single-family home building has been concentrated in Knox County and, to a lesser extent, Anderson County.
The rental market in the HMA is balanced, with an estimated vacancy rate of 7.5 percent, and the apartment market is also balanced, with an estimated vacancy rate of 3.4 percent. Over the past 5 years, multifamily construction has been concentrated along the -Interstate 40 corridor in Knox County.
Over the next 3 years, demand is estimated for 9,400 new homes and 2,525 new rental units.