Bottoms up: Housing prices on rebound
Darin and Joy Hall bought their four-bedroom Shawnee home for $173,000 eight years ago and invested another $40,000 in a new roof, granite countertops and other updates.
It still wasn’t their dream home. They wanted a wooded cul-de-sac lot, a flat driveway for their sons to play basketball on, a three-car garage and a more open interior. And about a year ago, the Halls decided it was time to move up to that dream.
But a funny thing happened on the way to the resale market.
When Pat Regan of Coldwell Banker Regan Realtors advised the couple their home would fetch about $185,000 — $30,000 less than they thought it was worth — Joy Hall said, “Screw it, we’ll just stay here.”
A year later, after trying to sell it themselves and bringing Regan back in, the Halls finally have their home under contract. But the price — $188,000 — makes Joy Hall’s stomach churn.
“For the market to get to a point where I wouldn’t be sick — we’re talking about years,” she said.
While no one sees the regional residential market climbing back to pre-2007 peak levels in the foreseeable future, indicators hint that demand and prices may be on a steady upward path for the first time since the U.S. housing bubble burst five years ago.
According to the Kansas City Regional Association of Realtors, or KCRAR, the average May home sale price across the eight-county region increased 6 percent, to $171,041, over the year-ago figure. And June average sales prices:
• Increased 4.9 percent over last year in Johnson County (to $265,842).
• Increased 24.9 percent in Wyandotte County (to $83,532).
• Decreased 2.1 percent from a year ago in Douglas County (to $172,079).
• Decreased 2.3 percent in Leavenworth County (to $160,361).
But according to Douglas County Appraiser Steven Miles, part of the drag in that county is coming from Baldwin City, where “a number of distressed sales coming on the market or sold earlier are affecting the sales prices for this area of the county.”
Leavenworth County Appraiser Bob Weber, meanwhile, cautions against placing too much emphasis on monthly or even yearly fluctuations in average sale prices. Looking at the averages over longer periods — such as the 2007-2011 span, during which Leavenworth County’s average sales price plummeted from $170,752 to $160,125 — is a more reliable means of spotting trends, Weber said.
Weber declined to speculate on whether the downward trend in his neck of the woods will continue. But Dan Lynch, owner-broker of Lynch Real Estate in Tonganoxie, said he’s been encouraged by the roughly 1 percent uptick he’s seen in home prices this year.
That, of course, doesn’t portend a boom, said Lynch, who has seen his firm’s average sale price drop from the high $160,000s to the low $160,000s since 2007.
But another measure, days on the market, shows that housing sales are headed in the right direction, he said.
Jim Mattes, of Mattes Appraisal Co. Inc. in Shawnee, agreed. According to Mattes, homes for sale east of Interstate 435 in Shawnee are now staying on the market for 94 days, less than half the year-to-date average. For homes for sale west of I-435 in the city, the average is only 49 days.
Ask Beth Kline how homes are selling and she’ll tell you “like hotcakes.” Kline, who leads the Shawnee-based Kline Group for Reece and Nichols, said she and another agent have sold 33 homes worth a total of $7.2 million so far this year. For the same period last year, they sold 15 for a total of $2.9 million.
Chris Snell, a 26-year-old first-time homebuyer who has one of Kline’s listings under contract, can attest to the rising demand, at least in the $225,000-to-$250,000 bracket he was looking in. As buyers do on the HGTV program “House Hunters,” Snell narrowed his selection down to three Shawnee houses on the market in April. But before he could make a decision and an offer, one of the homes sold. And within a week of Snell’s offer on another of the homes, all three were under contract.
“If you find something you like, you don’t have a lot of time to mull it over,” Snell said. “And you can’t expect people to come down very much on price. Most of the homes we looked at were selling within $5,000 of the listing price.”
Pat Regan, who sold the Halls’ home in 19 days, attributes the furious pace to 30-year fixed-rate mortgage rates, which have fallen to record lows approaching 3.5 percent, and low home prices.
For buyers with patience and flexibility, Regan said, it might be worth waiting for the dramatic savings that can be achieved by purchasing lender-owned properties through lengthy foreclosure or short-sale transactions. But other home prices are not going lower, he said.
Of course, agents have been claiming the market has hit bottom and “now’s the time to buy” for years. But according to Kline, “we really have hit the bottom this time; this is the turnaround.”
Mattes agreed but added that “we’re probably going to play a little game of bouncing along the bottom the next couple years, with the market getting better and rates going up for a while, followed by the market and then the rates going back down.”
But Mattes said yet another measure, home inventories, show the market is leaning toward a sustained rebound.
According to the latest inventory report from the KCRAR, there were 14,605 new and resale homes on the market in the region at the end of May — 16 percent fewer than a year earlier. That represented a 7.2-month supply, down from a 9.8-month supply. And generally speaking, a supply exceeding six months favors buyers, while a supply of less than five months favors sellers.
“We’re almost balanced now, so I think you’ll see prices coming back,” Mattes said.
Of course, homes in the higher brackets have a lot more ground to recover, Mattes added. In western Shawnee, the average sale price has fallen from $300,000 to about $225,000 over the last five years, reflecting the fact that upper-bracket sales have been scarce.
That’s partly due to the fact that financing is much harder to secure than it was in lax-underwriting days of subprime mortgage lending, which inflated the housing bubble and set the stage for a nationwide financial collapse.
The collapse and resulting credit crunch have been bad news for those stuck in the area rental housing market, where the average June rent was up 9.9 percent over the previous year, according to the latest Trulia Rent Monitor report.
Other victims have included home builders, who have stopped building speculative housing and, in many cases, gone under. But according to the Home Builders Association of Greater Kansas City, 1,216 new single-family permits were issued in the region through May this year, up 47 percent from the same span in 2011.
Those figures pale compared to the 4,519 single-family permits issued in the region through May 2006, when the market went on to hit a high-water mark of 9,384 permits for the year. But sources believe last year’s total, 2,301 permits, represented another market bottom the region is now climbing out of.