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When he bought his first home 25 years ago, real estate agent Bill Allen said buyers could attain the quintessential Prairie Village home — a cape cod spanning about 1,500 square feet — for about $100,000. Now, those homes go for $400,000 or more.
“That’s amazing, above-average appreciation,” he said.
And the real estate market in the northern Johnson County community shows no signs of slowing down anytime soon.
Real estate giant Zillow recently named Kansas City among its top 10 “hottest” real estate markets. And last month, the company named Prairie Village as its most popular city of 2022. That ranking took into account page-view traffic, sales, price appreciation and other housing metrics Zillow tracks across thousands of zip codes within the nation’s 100 largest metropolitan areas.
The designation comes as no surprise to agents like Allen, who for years has helped buyers, particularly first-time buyers, hunt for charming homes in the tree-lined suburb. The schools are great, it’s close to downtown Kansas City and the Country Club Plaza.
“It’s a very comfortable, peaceful setting. People have just loved it for years,” he said. “It’s ultra competitive because you’ve got X number of buyers that want to be in Prairie Village and it’s a very limited supply.”
While higher interest rates and years of rapid price increases have cooled the national housing market, Zillow data show continuing interest in the Kansas City metro area from buyers. That tracks with historical trends across Midwest real estate markets, which don’t traditionally see the dramatic price swings found in more expensive cities.
Crucially, prices in cities like Kansas City, Charlotte and Pittsburgh remain relatively affordable — even after years of rapid price growth.
“My big takeaway is that affordability was the biggest challenge facing home buyers in 2022,” said Jeff Tucker, senior economist at Zillow. “So different avenues that help home buyers find a more affordable, larger home are going to be really popular in 2023.”
A huge swath of millennials are entering their mid-30s, the typical age of first-time home buyers.
“People are really determined to go out there and make it happen,” Tucker said. “And it’s just looking a lot more feasible to kind of live that aspect of the American dream in places like Kansas City, where your money goes a lot further than it does in California or New York.”
While we may not see a buyer’s market any time soon, Tucker said buyers can at least expect some relief from the ultra-competitive landscape that has defined home sales since the onset of the pandemic.
“The good news for buyers is that it has cooled off a lot relative to the last couple of years,” he said. “There’s not quite as much competition, they won’t feel as pressured to submit an offer in 24 hours with all the contingencies waived. So that’s really good news for buyers.”
Even with high inflation and mortgage rates, the National Association of Realtors forecasts that limited housing inventory will prevent major price drops for most American markets this year.
That’s the story in Kansas City, according to the most recent data from the Kansas City Regional Association of Realtors.
The number of home sales dropped toward the end of 2022. But average sales prices for the year increased to $336,102 — up 10.4 percent over 2021. The average sales price in Jackson County reached $285,817, while the average price of homes in Johnson County reached $486,854.
After dipping to record lows in 2021, mortgage rates more than doubled last year. That adds hundreds of dollars to monthly house payments for buyers, further constraining buying power.
Yet, today’s rates aren’t historically high.
The average interest rate for a 30-year fixed mortgage is currently just above 6% — a relative bargain compared to interest rates of the 1980s, 1990s and early 2000s.
That perspective has soothed concerns of some buyers, who still expect to see a higher rate of home value appreciation than the interest rate on their mortgage, said Sydney West, president of the Kansas City Regional Association of Realtors.
“And rent prices are high right now as well,” she said. “You’re going to have to pay for housing one way or the other so you might as well get some equity from your dollars.”
West said some buyers may be waiting for prices to decline before jumping into the market — especially as some national headlines portend a major softening. But local buyers shouldn’t be swayed, she said.
“Don’t listen to what’s happening on the coasts,” she said. “As always, what’s happening on the coasts is not what’s happening in the Midwest.
“There’s still a housing shortage. We don’t have houses and we have people who aren’t sure if they want to move. So the houses that get put on the market are moving quickly.”
Still, the local market is starting to show more signs of balance.
Rising interest rates have slowed the pace of the market here. Homes aren’t always selling the day they list or commanding offers above the asking price.
“It’s really normalizing,” said Christian Barnes, CEO of Better Homes and Gardens Real Estate Kansas City Homes.
Thus, she expects to see modest price appreciation this year — not a crash in prices, but also not the ultra-rapid appreciation that has defined the pandemic real estate market.
In 2020 and 2021, buyers often waived inspections and the best homes often saw bidding wars. Now, homes are sitting on the market a bit longer. But certain locations, like Johnson County, are still proving ultra-competitive.
Barnes pointed to a recent suburban listing priced at $425,000. Her company represented a buyer that made an aggressive offer on the home, but ultimately lost out after the house fetched eight offers.
“It’s really dependent on the area, whether they’re priced appropriately for the condition and location of the home,” she said. “Inventory is still low.”
Kevin Hardy covers business for The Kansas City Star. He previously covered business and politics at The Des Moines Register. He also has worked at newspapers in Kansas and Tennessee. He is a graduate of the University of Kansas
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2023-01-23 11:30:00
