‘It is crazy.’ Despite pandemic, Kansas City area housing prices soar in hot market
During the metrowide stay-at-home orders this spring, Stacey Johnson-Cosby wondered if Kansas City’s real estate market would ever bounce back to normal.
It turned out, she didn’t need to worry.
As soon as cities started lifting stay-home orders, the ReeceNichols agent’s phone started ringing again with a flood of house hunters.
“It is crazy,” she said of the current market.
Data from the Kansas City Area Regional Association of Realtors show home prices surging as homes fly off the market. Across the region, the average sales price in July was $267,569 — up more than 10% over July 2019. That region stretches beyond just the metro area to include places such as Lawrence and St. Joseph.
The real estate market was already competitive before the coronavirus, with Kansas City home prices rising faster than most U.S. cities, even boom towns like Denver, Nashville and Austin. And that momentum has only increased, despite the pandemic causing near-record high unemployment rates and impaired consumer confidence.
The pandemic has made some people reconsider what they want in their homes. Some need an extra bedroom for a home office or want a second living area to spread the kids out during virtual learning. Others are seeking wide open spaces and may not care as much about long commute times.
For the most desirable properties, brokers say potential buyers should be prepared to look at a listing and make a serious offer — oftentimes above list price — on the first day it hits the market.
“You must be prepared instantly,” Johnson-Cosby said. “If it comes on the market Tuesday, it’s going to sell Tuesday or Wednesday. If it goes on the market that morning, it will probably sell that night.”
Ever-desirable housing markets like Brookside and Johnson County remain robust. But Johnson-Cosby says buyers have also amped up the pressure in some traditionally less competitive areas like Wyandotte County. While still lower than the average price in Johnson or Jackson County, data show the average sale price for a home in Wyandotte County — about $190,0000 in July — increased more than 19% from July 2019.
“It surprises me that it is so competitive there,” she said. “And that is different.”
A widespread lack of inventory is the biggest driver of the current price wars, said Stanley Longhofer, a professor and director of Wichita State University’s Center for Real Estate.
Generally, a market is considered balanced if it has a four- to six-month inventory of homes on hand, he said. That sort of supply doesn’t favor buyers or sellers. But in Kansas City, there is only about one month worth of homes listed at a given time — creating a market that greatly favors sellers.
“Those are just unthinkably tight inventories,” Longhofer said.
A strong sellers’ market
Early on in the pandemic, listings slowed as homeowners worried about letting strangers inside their homes. At the same time, demand increased as interest rates dipped. With stimulus checks and expanded unemployment benefits, many Americans have fared better through the coronavirus pandemic than previous recessions, Longhofer said.
But it’s unclear how long the current recession will persist. Longhofer expects a reckoning is coming, though he doesn’t predict any major dip in home values for the foreseeable future.
“I don’t think we’ve seen the full ramifications yet,” he said. “A lot of it is going to depend on how deep and how protracted the recession is.”
In the meantime, it’s a great time to sell a home, particularly those priced closest to the local average. But some sellers are wary of listing their properties, lest they have to then go on the market as a buyer.
“I’ve been doing this for almost 20 years and this is the strongest sellers’ market I’ve seen by far,” said Michael Pierce, a local broker and president of the Heartland Multiple Listing Service, the central database that lists all Kansas City-area homes.
He said many buyers have different needs than they did six months ago. Some are considering more far-flung locations as they look for more space. And the ultra-tight market has made them less picky about fixtures and decor.
“Something they maybe wouldn’t have forgiven previously, they’re now more willing to overlook because the inventory is so low,” Pierce said.
Real estate agents are fortunate their industry hasn’t been hit as hard as others by the pandemic, he said. But a booming sellers’ market means brokers must spend more time searching and securing a home for potential buyers: an agent may have to help clients write five different offers before they finally prevail on a home.
The tight market here mirrors wider national trends.
Online real estate listing service Zillow reports that the national median list price continues to increase — reaching $344,660 this month, 7% higher than last year. And supply is constrained with 27% fewer listings from a year ago.
“Most housing observers have been pretty surprised by the resilience of pricing in the market,” said Zillow economist Jeff Tucker. “A lot of people thought they’d be getting a bargain right now.”
Generally, recessions lead to foreclosures, which can add more supply to the market. But forbearance programs, paired with stimulus funds and expanded unemployment programs, have likely kept more people in their homes, he said.
Zillow research shows Kansas City, Cincinnati, Columbus, and Raleigh among the nation’s fastest-moving large markets with sellers typically accepting offers after only four days on the market.
Plus, Tucker said “incredibly low” interest rates have made many people consider buying during the pandemic. FreddieMac reported the average 30-year fixed mortgage rate was still below 3% last week.
Still, the booming real estate market comes as advocates in Kansas City and across the country fear a looming eviction crisis for renters. With hospitality and service jobs hit the hardest, it’s likely that renters will face a more immediate fallout. And younger workers are more likely to move back home with families.
Tucker said that means the rental market will probably see lower prices before home purchase prices let up.
“The tide of demand for rentals is receding right now,” he said. “So I think landlords are going to start feeling pressure to not raise the rents or offer some concessions to fill those units.”
A ‘feast or famine’ business
There were days last week that Megan Alexander barely saw her kids as she worked furiously to find homes for potential buyers.
“This is the time you do absolutely everything you can,” said Alexander, an agent with Better Homes and Gardens in Lee’s Summit. “It’s feast or famine in this business and I think while people need to get into homes and while we have this insane, thriving market we have to take advantage of everything we can because we have no idea what the future holds.”
She said the current price wars have buyers seeking out more affordable markets like Raytown, Grandview and Kansas City, Kansas. She sees that as a positive development, one that will ultimately help rejuvenate some neglected neighborhoods.
Last week, she had nine offers on a two-bedroom home in Independence listed at $125,000.
“It went thousands above asking price,” she said. “Because people are going where they can afford to go.”
Even before the pandemic, rising costs were pushing many to consider exurban areas like De Soto, which has experienced a recent boom in both home construction and sales.
But strong markets like Blue Springs and Lee’s Summit remain hot, too. Alexander pointed to a Blue Springs home she listed at $220,000. It had 17 showings on its first day on the market and the seller ultimately accepted an offer at $30,000 above list price.
She’s even struggling to find a home for California buyers moving back to the Kansas City area. They’re looking at $1 million homes, but have still faced competitive bidding wars.
While it’s a good time to be in the business, she said this market is not all rosy. The prohibitive costs of new home construction have kept inventories down, she said, leaving a widespread shortage of homes across the metro.
“We have a true crisis,” she said.
Buyers often include personal letters in their official offers. And Alexander said many report continued difficulty finding a home they can afford. The market has pushed some to rental properties or even long-term hotels, she said.
“You hear a lot of people’s stories and it breaks your heart,” she said. “There are families that tried 10 times to get a house and they’re never the top offer. Or people who are at the absolute top of their budget and there’s just nothing available to them.”
Making the best offer
Ginny Murray had been looking for a place before the pandemic, hoping to move out of her Crossroads condo into a single family home with a yard. But every time she spotted a home online she liked, it was already gone.
So she hit the streets, walking around her desired neighborhoods. On a walk in Union Hill, Murray spotted a home she liked with a “coming soon” sign out front.
The home was officially listed on a Friday and had five offers by Sunday.
“I knew it would sell for over list price and I knew there would be multiple offers,” she said. “And that’s exactly what happened.”
Of course, price is king in real estate negotiations. But agents say buyers should also think creatively about extras they can include in their offers. Flexible closing dates, a willingness to cover closing costs and flexibility with inspection findings can help a buyer win approval.
Murray came in above list price and already had her down payment cash on hand.
Her advice for other buyers is simple: Be prepared. And be prepared to act fast.
“If you’re serious and you really think you want to find something now, you really need to stay on top of it,” she said. “Just looking on Zillow is not enough. You need to go walk and drive around.”
This story was originally published August 16, 2020 at 5:00 AM.
