There are markets on the west and east coast that have started to slow down a bit. Now to be clear, homes in those markets have gone from less than 30 days on market to about 30 – 40 days. The tax law related to mortgage interest deduction and the affordability factor has shown some impact in those markets where the average selling price is triple and quadruple of what it is in Kansas City. Sources there tell us that the length of time on market is finally starting to stretch.
In Kansas City, we are seeing some slight changes in the opposite direction. 6 months inventory is said to be a balanced market (for buyers and sellers). Still indicative of a strong seller’s market, 2018 finished with 2.2 months inventory as a 12 month average for existing homes. This is compared to 2.7 months in 2017. Despite the constricting inventory in 2018 home sales were up 1% over 2017 at 40,418 units.
Rising Interest Rates
Several weeks ago, the 30-year fixed mortgage rate broke through the 4.6%-mark, the highest level since May 2011 and the Fed has indicated there will probably be 2 more hikes in 2019. This is part of an ongoing upward trend in mortgage rates, which started over a year ago. As a side note, it’s estimated that 80% of Realtors in the market today have no experience in an environment of rising rates.
Affordability and Wages
For the past several years, home prices have increased at twice the speed of inflation. The 12 month median average sales price was up 7.9% to $205,000 over the previous year in Kansas City. Sellers received 97.3% of their original list price which was up .4% over 2017. Perhaps the overall affordability in Kansas City and pent up demand is still at play. With an unemployment rate under 3% and 61,000+ open jobs and average wage slightly below the national average, we will continue to watch how the combination of price growth, rising rates and stagnant wage growth will impact sales.
If we are starting to see a shift at all, it’s in homes that are not in the best condition or that are overpriced. Those homes are starting to sit on the market longer and we believe 2019 will continue to bring a little more balance to the market. Hopefully, first time home-buyers are going to see some opportunity in the market again.
We make it our job to understand market conditions in order to guide our clients to the best possible solutions. The KC metro is made up of a multitude of micro markets. Last year we sold over 230 homes priced from $91,000 – $1,236M from DeSoto to Liberty to Blue Springs and Peculiar. Our expertise is very uniquely positioned and we are standing by to help you and the people you care about have every advantage available when buying or selling a home.