Want to buy a house in Kansas City? Why local real estate market defies trends elsewhere

Matt Rourke/AP

Home prices are expected to keep rising in the Kansas City area, despite a difficult economy and higher mortgage interest rates that have cooled the market.

Kansas City metro area home values are expected to end the year up 13.8%, according to a new report from the Wichita State University Center for Real Estate. Next year, the rate is expected to slow to 6.5%, which the center says is still strong but closer to normal.

“Although bidding wars may not be as intense as they were earlier this year, it will continue to be a sellers’ market across most of the state,” said Stan Longhofer, director of the center.

Longhofer said that’s because, even with home price appreciation slowing, “the supply of homes available for sale remains near historic lows.”

Still, Longhofer said prospective buyers should not delay purchases in hopes of a big price drop.

“Home price appreciation will not continue at the outrageous pace that it was the last couple of years,” he said, “but it’s still going to be a very strong pace for these markets.”

Kansas City Realtor Jenny Delich said buyers for a long time had been almost guaranteed to pay more than list price, but the tide is starting to turn.

“Increasing (interest) rates have left sellers on the market a tad bit longer and (without) over 15 offers on what seems like every house, making this a better time to buy if you want to avoid the bidding wars,” she said.

The report noted that 30-year fixed mortgage rates, which rose sharply during the first half of the year, bounced between 5% and 5.5% in the summer “as markets struggled to assess how Fed policy will affect inflation and economic growth.”

The Mortgage Bankers Association “appears to believe the Fed will navigate a soft landing,” the report says. The association predicts that mortgage rates will fall to 4.9% by the end of 2023.

Even if there is a significant softening in demand due to higher mortgage rates, the report says, it would take a long time to return to a balanced housing market in Kansas City. There were less than half as many homes available for sale at the beginning of 2020 than there were in 2011.

Kansas City has been in a sellers’ market since at least 2015, the report says, with big price increases building for years.

In August, the average sales price for homes in the region increased to $324,745, according to the Kansas City Regional Association of Realtors. That figure was up 10% over the average price of $295,125 recorded in August of last year.

The average sales price has increased more than $100,000 over the last five years: the association reported an average price of just $214,272 in 2017.

The average price of Jackson County homes sold in August increased 16.2% over the previous year, reaching $297,460.

In Johnson County, average prices are now approaching half a million dollars. In August, the association recorded an average sales price of $498,014 — an increase of more than 16% from the previous year.

The picture is a little different in other parts of the country, according to a different report, from mortgage technology and data provider Black Knight.

That report shows some markets are seeing price drops of 10% or 13% as potential buyers drop out of the market and sellers are forced to slash prices. The prices are still significantly higher than a year ago, however.

The Wichita State report predicts home sales in the Kansas City area will end 2022 down 8.3% at 41,940 units. But sales activity should rebound next year and increase 5.6% to 44,290 units, the report says.

Since inventories are still going to be tight, buyers are advised to know where they want to live before selling their existing house, because they may still have a hard time finding exactly what they want.

“The market should still be pretty strong to be able to sell if you want to put your house on the market after you’ve got a contract,” Longhofer said.

As for new homes, after strong gains in both 2020 and 2021, single-family home construction in the metro slowed considerably in the first half of the year. It is expected to be down 10.7% from the previous year due to supply chain issues, and fall another 1.7% next year.

The Star’s Kevin Hardy contributed to this report.