A tight market leaves KC area home buyers desperate
Just one month into Amanda and Andy Koukol’s quest to buy their first home, Kansas City’s housing market has left them frustrated and exhausted.
They’ve left work in a rush to see a house, only to learn on the way that someone else has already swooped in with a winning offer.
Twice they’ve put in bids for $12,000 and $14,000 more than the asking price and still didn’t get either house.
It’s not that the Koukols are being too particular. While they rent a house in Prairie Village, they’re looking on both sides of the state line and don’t have an immediate concern about school districts.
But the three bedroom, two bathroom house they’re looking for is in high demand, and supply is unusually low.
The Koukols aren’t alone.
The kinds of hefty or creative offers they’re losing out to point to an inventory-starved housing market in Kansas City, the likes of which haven’t been seen in years. And it’s leading to desperation among some buyers.
Kansas City buyers have skipped home inspections so deals don’t fall through.
Some have created self-promotional videos in an effort to woo sellers.
And some have even put down offers on homes sight unseen so they don’t miss out.
Nationwide, the country is seeing the biggest housing inventory crunch in 20 years, according to data gathered by Trulia, a real estate listing site.
The data, distributed by The Associated Press, tracks housing inventory in the top 100 metro areas across the country.
There are 5 percent fewer homes on the market nationwide than a year ago. In Kansas City, the figure is nearly 14 percent.
All of the biggest metro areas in the region — Kansas City; St. Louis; Wichita; Omaha, Neb.; Oklahoma City; and Tulsa, Okla. — saw a decrease in housing inventory since 2012.
But Kansas City had the biggest decrease — 55.4 percent fewer homes available from 2012 to 2017, according to Trulia data.
The biggest decrease in Kansas City inventory was for midrange homes, which saw a 70 percent decrease in inventory over the last six years.
While March, April and May in a normal housing market is often the busiest time in residential real estate, realtors say that market activity the last two years has made it always feel like spring.
“If you have a seller, it’s fantastic,” said Abby Beckloff, a Reece & Nichols agent who represents the Koukols. “If you have a buyer, they’re dealing with frustrating losses day after day after day.”
The price is right
Simple economics dictate that when high demand meets low supply, the result is higher price for the product.
The biggest median price increase in Kansas City was among premium homes, which have a 48 percent higher median price in 2017 than in 2012, according to Trulia. Now, the median price for a premium home is $369,000.
The median price for a trade-up home this year is $154,400, compared to $134,933 in 2012, a 14.4 percent increase.
The median price for a starter home this year is $65,167, up 7 percent from $60,667 in 2012.
Beckloff said houses in the Kansas City metro area under $350,000 are typically receiving multiple offers, usually over list price. That makes it difficult for a buyer working a full-time job to make it to a showing in time to make a competitive offer.
“A house that’s been listed that day, there have been four, five, six offers,” Beckloff said. “It’s driving prices unusually high.”
That dynamic favors buyers who offer cash or are ready to offer much more than than the asking price over the cash-poor buyer or one who is looking for a seller to accept a contingent offer.
“A buyer that has fairly deep or significant money to put down is going to be in a better position competitively than someone who is cash-poor and can’t play that aggressively,” said Jeff Hill, an agent with Re/Max Premier Realty and president of the Kansas City Regional Association of Realtors.
It also leads to somewhat unusual bid characteristics beyond just making a high offer.
Some waive their right to inspection. Others waive their right to request that a seller make repairs after an inspection, but reserve their ability to cancel a contract if the list of deficiencies is too much. Buyers sometimes pay closing costs, which is contrary to tradition.
Beckloff said the desperation by some buyers leads to unrealistic offers that collapse when a house goes under contract — particularly when an appraisal doesn’t match the offered price. In those instances, banks are reluctant to loan out more than a house is worth and could leave buyers having to make up the difference on their own.
“Houses are getting offers, but a pretty good percentage of them are losing contracts when reality sets in,” Beckloff said.
Causes for the crunch
So how did Kansas City arrive at such a tight housing market?
Experts say it’s a combination of the metro area’s growth in the last seven years and a recession that drove home builders out of the market.
There’s even homeowners who would otherwise consider selling their house balking at the possibility of then becoming a buyer and risking not being able to land a new home by the time they leave the old one.
“I think there’s a lot of fear that we know we can sell the houses in a week or a day but may not have a place to go for a while,” Hill said.
“No one wants to go to Extended Stay America with their dog and two kids.”
Recently released census data show the Kansas City metro area has grown by nearly 100,000 people since 2010, which is also putting pressure on the housing market.
“Kansas City is growing so quickly, they’re attracting so many people with new tech jobs and good business growth in the metro area,” Beckloff said. “We’re seeing a big influx of people relocating to Kansas City.”
Permits for building new single-family homes slowed during the recession. In 2007 — the last year before the housing bubble popped and led to the recession — there were 6,835 single-family homes built in the Kansas City region, according to figures published by the Kansas City Home Builders Association. Those numbers dipped during and following the recession.
While permit activity has ramped up in recent years, last year’s total of 5,489 single-family homes indicates that the new construction market has not reached pre-recession levels.
“We’re hearing that it’s partially that new construction is lagging,” Hill said. Home builders “got beat up pretty bad when the market turned and are not taking as many chances or spreading themselves out as they did in the past.”
Multifamily permits rose quicker, perhaps reflecting the increased demand for rented units over owned, said Jeff Pinkerton, senior researcher at the Mid-America Regional Council, the planning organization for greater Kansas City.
“We could have overbuilt single family during the boom and therefore had an oversupply that helped cover us during the early years of the recession,” Pinkerton said in an email.
“It seems to me that maybe there is still some question about what the market really wants,” he said.
Do Kansas Citians want single-family homes or apartments? Do they want to live in the suburbs or downtown? Do they want large homes or small homes?
“These questions will be answered by the market in coming years,” Pinkerton said, “but the uncertainty could also be playing a role in the slower permit activity and therefore lower housing availability.”
For the Koukols, they got their own answer sooner.
On Friday, as they had been considering how much longer they would keep up the discouragement of house hunting, they finally got some good news: Their offer on a house that had 21 showings and two other bids was accepted.
“It was their lucky day,” Beckloff, their real estate agent, said in an email.