Home News Interest rate hikes are making Kansas City’s real estate market ‘savagely unhealthy’ | KCUR 89.3

Interest rate hikes are making Kansas City’s real estate market ‘savagely unhealthy’ | KCUR 89.3

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Andy Scoates and Stephanie Scoates have moved every few years since coming to the United States over 20 years ago. Recently moved from Oklahoma to Kansas City. They spent over a month looking for a house to buy on the subway.

At an open house in the Leeds Summit area this weekend, the couple said the money they made from selling their last home wasn’t growing as much as they had hoped.

“We were the only ones who saw it when we bought the house in Oklahoma, but we instantly loved it,” said Andy Scourts. “I made an offer that was below asking price and it was accepted. That was only two and a half years ago. It’s crazy how much I could have bought two years ago and how much I could buy now.”

The Federal Reserve is interest rate hike In another attempt to counter inflation, it rose 0.75% in June and has gained another 0.75% over the past week.

Higher rates appear to be slowing Kansas City down hot housing market: Subway sales of existing homes have fallen 10.2% since May, while new home sales have fallen 5.3%.

Meanwhile, pending sales of new homes A whopping 30.5% drop last month.

Despite the slowdown, buying a home isn’t that easy.

According to Andy Scoates, the pair have searched for at least 20 Kansas City homes so far, with hundreds more online. Skoates made offers for two homes, but the bids were too high and he lost.

Other houses they were interested in couldn’t even discuss making an offer for them.

Stephanie Scoates said, “In the past, when you put an offer on a house, you could put a lower price than the asking price, and you were told not to give the asking price.”My friend in California. said I had to offer more than the asking price, it had to be at least $10,000. It used to be, but now it’s crazy everywhere.”

According to the Federal Mortgage Mortgage Corporation, demand for housing has been high since the start of the COVID pandemic, mortgage rates are at record lows, and remote work is on the rise.

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

“Currently, the average number of days on the market is 16 days, which is still very low, with a significant number of homes on the market and in contract in just a few days,” says Pierce. “Our average remains at 103% of average selling price to list price, but we haven’t seen the type of frenzy we’ve seen for a long time, and it’s moving pretty quickly.”

According to KCRARThe average price of a new home in Kansas City has risen about 18% since June, peaking at about $517,000, according to the company. Existing home prices rose 15% to about $300,000.

Mortgage interest rates doubled

Logan Motashami, principal analyst at Housingwire, said the current housing market is “very unhealthy.” He believes the problem started in 2020, but he’s not entirely due to COVID-19.

According to Mohtashami, the combination of millennials entering the market and people “exporting inflation” (moving from more expensive parts of the country to cheaper areas like Kansas City, pushing prices up) will Responsible for rising house prices.

And Kansas City doesn’t have enough housing stock.

“taller than [mortgage] Interest rates have caused a pricing cooldown and we should see that year-over-year in the second half of this year,” Motashami said.

according to freddie macThe average interest rate for a 30-year fixed-rate mortgage is 5.3%, more than 2% higher than in early 2022, and almost double what it was this time last year, according to the .

According to Dr. Jessica Lautz, VP of Demographics and Behavioral Insights at the National Association of Realtors, these price spikes are “putting some buyers on the sidelines.”

“I think this is really unfortunate for a lot of people who have tried to get into the housing market over the past two years, lost a lot of contracts in the bidding wars and are now getting discounted out of the housing market,” Rautz said. increase.

Lautz said some first-time homebuyers are moving in with roommates to combat high down payments and mortgages. This strategy is popular not only for affordable housing, but also for seniors in need of companionship.

However, it is not an option in some areas of Metro. In April, Shawnee City Council Voted to limit the number of irrelevant people A person who can rent a room in one house. Cohabitation regulations are petition From some residents who called it “racist” and “classist.”

Of future homebuyers, Lautz says he sees people moving back in with their parents or renting longer in an attempt to save a down payment. there is

Roxy Hamill

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shawnee mission post

Jae Moyer (left) of Shawnee and Liz Smith of Olathe were among the few opponents of Shawnee’s new cohabitation ordinance.

rent is going up

In May, the median rent in Kansas City was over $1,300 per month. According to Realtor.comThis is an increase of about 11% from last year.

With both housing prices and rents high, more and more people in Kansas City are left without the option of buying affordable housing.

“With rents rising at this pace, it’s very difficult to even think about buying a home, let alone filling your car with gas and buying the groceries you need for your home.” Lautz says.

Tara Raghuveer, director of KC Tenants, said tenants are in crisis due to inflation and rising rents.

Other costs, such as gas and food, are likely to go back up once inflation subsides, but rents will continue to rise.

“Landlords tend to charge whatever the market allows, not based on the condition or quality of the home,” says Raghuveer. “Unlike in other places where Americans are being squeezed by inflation, rent isn’t something that can be cut easily. You can’t reduce your need for a home, you can’t reduce your rent payments.”

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

“It’s a ban on home ownership for an aspiring class of people to buy a home,” Raghuveer said.

Immediate relief is unlikely

The Kansas City housing market will not rebalance without an increase in supply. More homes for sale means less competition and more room for price negotiation.

But Pierce says it will take years to get there.

“We really need to see how low Kansas City stock is,” says Pearce. “He has only 4,700 units on the market, which is significantly less than normal expectations, selling about 4,300 homes a month.”

Motashami said lower sales would give the market time to stockpile and if mortgage rates were to remain above 5%, “we could have a balanced market by next year. I think.

Whether that happens or not, Raghuveer says politicians need to intervene on solutions for affordable housing.

“One of the key things in an inflation crisis situation is that adding supply to the market is not a quick business,” said Raghuver. “The earliest he’ll have an impact on the market will be in three to five years. That’s not going to do any good for tenants who can’t afford to pay rent now or in August.” .”

Back at Lee’s Summit Open House, Andy Scoates and Stephanie Scoates want to find a home at a price point that works for them. But they are even more concerned about people entering the market for the first time.

“I’ve been lucky enough to buy a home in this state for 22 years and have a little nest egg.”

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