Kansas City metro's mini real estate boom

Rising sales, prices attributed to rural flight, pent-up demand

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Rising sales, prices attributed to rural flight, pent-up demand

Steve Bergsman
Inman News®

"Toto, I've a feeling we're not in Kansas any more."

But, Toto, maybe you should be. And that would probably apply to anyone else who is not looking for a heart, a brain or courage but a nice home in one of the most stable housing markets in the United States.

Back in March, two news items caught my eye. First, a report by the Federal Housing Finance Agency that noted a seven-state region, which included Kansas, had the highest home-price appreciation from December 2011 to January 2012.

On the heels of that report came a LendingTree survey called, "America's Healthiest Housing Markets," which listed Kansas at No. 9, right behind Utah, Virginia and Colorado.

Kansas, a long, rectangular-shaped state in the heart of the Midwest, boasts ample agriculture production and even good oil and gas (a lot of small, stripper wells have been pumping continuously since the price of oil passed $60 a barrel), but, in terms of population core and gross domestic product (GDP), all that's somewhat misleading because the state has been undergoing a general urbanization.

One-third of the state's economy is located in the Kansas City metro area, said Art Hall, director of the Center for Applied Economics at the University of Kansas. "If you include Lawrence (home to the University of Kansas), you get up to more like 40 percent of the economy."

The densest of the those Kansas City metro counties is Johnson County, home to Overland Park, a city with a population of 173,000 in 2010, up from 149,000 in 2000. The county population reached 544,000 in 2010, up from 451,000 in 2000. Other growing cities include Shawnee, Mission and Lenexa.

The state's largest city, Wichita, with a city population of 382,000, is located in the south-central part of the state. Hall also said that a growing population corridor has developed along Interstate 35 from Wichita through McPherson and Salinas to Manhattan.

So, while the state population growth is generally flat, because of internal migration the urban areas are still expanding, which helped those markets considerably during the Great Recession. The state's economy was extremely stable because of high agricultural prices, and, as Hall points out, as with other Midwest states, there is "high labor participation; everyone is employed unless a manufacturing operation goes down."

Indeed, unemployment was about 3 percentage points below the national average. "We move in lockstep with the national economy, but we tend to be better," said Hall.

Finally, when it comes to housing, the Kansas metros didn't experience the huge housing price bubble, so the Great Recession bust was moderate.

Traditionally, the Wichita area, for example, shows a 2.5 to 3 percent increase per year in house price appreciation, said Bud Cortner, president of Wichita Area Association of Realtors Inc. and a principal with Keller Williams Realty Signature Partners LLC. "When you are on that type of schedule, you don't have the kind of bust that areas experiencing 20 percent to 30 percent appreciation experienced. We have taken an 8 percent to 10 percent hit."

Wichita is a manufacturing city with a strong aviation sector, which means the city's housing market moves differently than Johnson County. During the peak year of 2007, home sales reached 13,000 units; now the market sees about 7,000 homes moving, which Cortner calls "the new norm."

Back in February 2009, the average sale price in the Wichita area was $109,000; the average price rose to $120,000 in 2010, back down to $109,000 in 2011 and this year touched $104,000.

There is some good news in this market, according to the South Central Kansas MLS Inc., which reported existing-home sales climbed 16.7 percent between January and February of this year, and 22.8 percent between February 2011 and February 2012.

Meanwhile, in February, the number of units sold hit 924, a nice increase over the 773 homes sold a year earlier, Cortner said. The SCK MLS reported months of inventory for existing homes decreased to 7.6 months.

Nevertheless, Cortner cautioned, new construction (which used to be 20-25 percent of the total market) has slipped down to 6 percent, and the formerly high-priced market around Flint Hills National Golf Club has seen sales drop substantially.

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