Rising interest rates are making Kansas City’s real estate market ‘very unhealthy’. KCUR 89.3

Andy and Stephanie Scotts have moved every few years since coming to America two decades ago — most recently from Oklahoma to Kansas City. They spent over a month looking for a home to buy in the metro.

At an open house in the Lee’s Summit area this weekend, the couple said the money they made from selling their last home isn’t expanding as much as they thought.

“When we bought a house in Oklahoma, we were the only ones who looked at it, but we loved it right away,” said Andy Scotts. “We submitted an offer that was below the asking price, and it was accepted. This was only two and a half years ago. What we could afford two years ago is crazy, and what we can afford now is definitely different.”

It has the Federal Reserve. Raised interest rates Again in an attempt to fight inflation – a 0.75% increase in June, and another 0.75% last week.

The highest rates seem to be slowing Kansas City Hot housing marketSales of existing homes in the metro are down 10.2 percent since May, while new home sales are down 5.3 percent.

Waiting for the sale of new homes, meanwhile, have decreased by 30.5 percent last month.

Despite the slowdown, buying a home hasn’t gotten any easier.

Andy Scotts said the couple has seen at least 20 Kansas City homes so far — and hundreds more online. The Scotes made offers on two houses but were rejected.

In other houses you want, the house is sold before even discussing to sell.

“When you made an offer on a house, you could offer less than the asking price and you would be told not to offer the asking price,” Stephanie Scotts said. “A friend of mine in California said you have to offer more than the asking price — at least $10,000. That was in California and now it’s the norm nationwide. We thought that was crazy then, and now it’s crazy everywhere.”

According to the Federal Home Loan Mortgage Corporation, demand for housing has been strong since the start of the Covid-19 pandemic due to low mortgage rates and the rise of remote work.

Michael Pearce, president of the Kansas City Association of Realtors (KCRAR) and founder of SEEK Real Estate, said sales are still competitive despite the slowing market.

“Our average days on the market right now is 16 days, which is still very low, and there are a lot of homes that are on the market that go under contract in a few days,” Pierce said. “Our average is still 103% of the average sale price versus list price, but we’re not seeing the kind of churn we’ve seen in a long time, and that’s come quickly.”

According to KCRARThe median price in Kansas City has risen nearly 18 percent since June, reaching a high of $517,000. Existing home values ​​increased by 15%, to $300,000.

Mortgage rates have doubled.

HousingWire chief analyst Logan Mohtashami says the current housing market is “very unhealthy.” He believes the issues started in 2020, but not entirely because of Covid-19.

According to Mohtashami, the combination of millennials entering the market and people “exporting inflation” — moving from more expensive areas of the country to cheaper ones like Kansas City to raise prices — is responsible for rising home prices.

And in Kansas City, there isn’t enough housing stock to go around.

“Higher [mortgage] Rates will create a cooldown on prices, and we should see that year-over-year in the second half of the year,” Motashami said.

according to Freddie MacThe average interest rate for a 30-year fixed-rate mortgage is 5.3%, up more than 2% since the start of 2022 and nearly double what it was at this time last year.

According to Dr. Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors, these price increases are “pushing some buyers away.”

“I think it’s really unfortunate for a lot of people who have tried to get into housing over the last couple of years and probably lost a number of contracts in bidding wars and are now out of the housing market. ” says Lautz.

Lautz said some first-time homebuyers are moving in with roommates to combat higher down payments and mortgage rates. This strategy is popular with seniors looking for companionship and affordable housing.

However, this is not an option in some metro areas. In April, the Shawnee City Council He voted to limit the number of unrelated people Can rent rooms in a house. The cohabitation rule was triggered by a Petition Some residents called him “racist” and “classist”.

For prospective homebuyers, Lauts said she’s seeing people moving back in with their parents or renting long-term to save for a down payment. But rising rents make it that much more difficult.

Jay Moyer, left, of Shawnee and Liz Smith of Olathe were among a handful of protesters against Shawnee's new cohabitation ordinance at Monday's City Council meeting, urging the council to amend or repeal the new rules.

Roxie Hamill


Shawnee Mission Post

Jay Moyer, left, of Shawnee, and Liz Smith of Olathe were among a handful of opponents of Shawnee’s new cohabitation ordinance at a city council meeting, urging the council to amend or repeal the new rules.

Rents are also increasing.

The median rent in Kansas City was over $1,300 a month in May. According to Realtor.com. This is an 11 percent increase compared to last year.

Both home prices and rents are high, leaving many people in Kansas City without options for affordable housing.

“When your rent is going up at that rate, it’s incredibly difficult to even think about buying a house, let alone putting gas in your car or buying groceries for your home,” says Laut.

According to Tara Raghuveer, director of KC Tenants, inflation and rising rents are putting renters in a crunch — one that won’t go away.

While other expenses, such as gas and food, may fall back as inflation slows, rents will continue to rise.

“Landlords charge whatever the market allows, and it doesn’t depend on the condition and quality of the house,” says Raghuv. “Unlike other areas where Americans are being squeezed by inflation, rent is not something you can easily afford. You can have flexibility in your life to reduce the amount of gas or driving you need to do. You can’t reduce your housing needs. You cannot deduct the amount you pay in rent.

Raghuveer says the rate hikes the Federal Reserve uses to stabilize the housing market will put more pressure on renters.

“It makes home ownership prohibitive for a segment of people,” Raghuveer said.

Little chance to get relief soon

Without an increase in supply, the Kansas City housing market will never balance again. More homes for sale means less competition and more room for price negotiation.

But Pierce says it will take years to achieve that.

“You really have to see how low the inventory is in Kansas City,” Pierce says. There are only 4,700 homes on the market, and that’s a lot less than you’d normally expect – and we still sell 4,300 homes a month.

Motashami said the decline in sales numbers will give the market more time to build inventory and believes that if mortgage rates remain above 5%, “we can have a balanced market next year.”

Whether that happens or not, politicians say they still need to find affordable housing solutions.

“An important factor in the inflationary crisis is that increasing supply to the market is not a fast business,” said Raghuveer. “The most immediate impact on the market is three to five years. That doesn’t help tenants who can’t pay their rent now or who can’t pay their rent in August.”

Back at the Lee’s Summit open house, Andy and Stephanie Scott are eager to find a home in their price point that works for them. But for first-time marketers, they are more concerned.

“We’re lucky, after 22 years of buying houses here in the states, we’ve built a little nest egg,” says Andy Scotts. But I feel sorry for the people at the top of the ladder.

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