Dismal 2023 numbers in the Kansas housing market need context. They should also spur action.
To begin, this year’s 18 percent drop in sales is compared to the unrealistic benchmark of 2022, when federal stimulus funds were still flowing.
In the first half of 2022, homes were selling for 15% above market value, while mortgage rates hovered below 3 percent. Not only could people ask more for their homes, but buyers had easy access to cheap money.
That all changed mid-2022, when rising inflation caused lending rates to increase from a historic low of 2.65 percent to above 7 percent, where they remain today.
This is when it’s important to note today’s lending rates are close to the norm. For the last 50 years, the long-term average for mortgage rates is just under 8 percent.
The same applies to home sales.
In 2019, sales in Kansas were up 0.9 percent. When the pandemic arrived in 2020, home sales increased 7.6 percent, and another 4.6 percent in 2021. Likewise, the appreciation rate of homes jumped to 14.5 percent in rural areas during that same period.
Those years were an anomaly in Kansas’ recent history.
Today, most financial experts are feeling confident the worst is behind us in terms of lending rates primarily because they see inflation coming down substantially, according to Stanley D. Longhofer of Wichita State University’s Center for Real Estate.
In Kansas, a robust labor economy has helped keep the demand for housing strong.
Unemployment remains low and wages continue to climb.
The problem is supply.
In Southeast Kansas, sales are down by double-digits because of a lack of inventory.
Historically, this region has a six- to eight-month supply of homes, calculated by the number of active listings divided by the average pace of monthly sales.
For example, if 200 homes are listed and sales average 50 a month, then the region has a four-month supply of homes.
