Kansas City Real Estate Market: Prices, Trends & Forecasts 2022

The Kansas City real estate market, situated precariously on the border of both Kansas and Missouri, has developed a reputation for affordable real estate, strong cash flow, and great investment opportunities. Perhaps even more importantly, however, is the city’s position to cater to first-time homebuyers. Thanks—in large part—to a relatively low median home value, real estate in Kansas City has seen a large increase in demand for entry-level homes. While that’s not necessarily unique to the “Gateway of the Southwest,” it is important to note that few cities (if any) have seen a larger increase in FHA buyers in recent history.

First-time buyers are inherently drawn to the Kansas City housing market, but demand may increase on the heels of several prominent indicators. The Coronavirus, in particular, has forced the government’s hand into reducing interest rates to a level that new buyers will find irresistible. On top of that, local unemployment appears to have been slightly more insulted than the national average, which should serve as a catalyst moving forward. Thus, while COVID-19 was undoubtedly unwelcome, it may have actually disrupted the Kansas City real estate market enough to create an opportunity for everyone: buyers, sellers, and investors.

Kansas City Real Estate Market 2022 Overview

  • Median Home Value: $211,571

  • Median List Price: $356,600

  • 1-Year Appreciation Rate: +17.6%

  • Median Home Value (1-Year Forecast): +15.4%

  • Months Of Supply: 0.7 (-36.4% year over year)

  • Total Inventory: 2,304 (-35.2% year over year)

  • Median Days On Market: 22 (-18.5% year over year)

  • Closed Sales: 3,359 (-3.6% year over year)

  • Pending Sales: 2,473 (+4.4% year over year)

  • Median Rent: $1,170 (+9.6% year over year)

  • Price-To-Rent Ratio: 15.06

  • Unemployment Rate: 2.7% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 495,327 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $54,194 (latest estimate by the U.S. Census Bureau)


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Kansas City housing market

Kansas City Real Estate Market Trends 2022

“The City of Fountains” has experienced a lot in the wake of the pandemic, which has many residents asking one simple question: Is Kansas City a good place to invest in real estate? As long as investors listen to prominent market trends, the answer is a resounding yes. That said, let’s take a look at the Kansas City real estate market trends most likely to play out in the near future:

  • Prices Will Continue To Rise: Kansas City home values have increased year over year for a decade. In the last year, however, local home values have increased 17.6% in the wake of the pandemic. The latest increases are directly correlated to a distinct lack of inventory, the threat of interest rates rising from historic lows, and pent-up demand. Simply put, there’s a lot of competition in the Kansas City real estate market and not enough new listings have been brought to the market. As a result, prices will continue to rise, perhaps as much as 15.4% over the next year.

  • Borrowing Costs Will Increase: In the latest Fed meeting, Jerome Powell made it abundantly clear that interest rates needed to rise to combat inflation. To balance a market that has received years of stimulus payments, borrowing costs must increase. While there is no telling how much interest rates will rise over the course of the year, it is safe to say mortgages will start costing buyers more. However, the increase won’t happen overnight, which will most likely spur a lot of buying activity in the Kansas City real estate market in the near term.

  • Rental Rates Will Go Up: Kansas City homebuyers have already seen the threat of inflation, a lack of supply, and a lot of competition drive up home values 17.6% in the last year. Consequently, those who couldn’t afford to buy or couldn’t beat out the competition are now relegated to an increasing renter’s pool. In fact, more people are expiated to rent than in recent history, which will drive up prices faster than last year.

  • Investors Will Prioritize Long-Term Exit Strategies: As profit margins are eroded by increasing home values and rental property indicators grow more attractive, more investors will look to become landlords in 2022. While acquisition costs will remain high, borrowing costs are still attractive and investors can capitalize on higher rents to justify their purchases. More importantly, however, the added demand will decrease the three of vacancies

Foreclosure Statistics In Kansas City 2022

Foreclosures were on the decline for the better part of 2021. Government intervention and foreclosure moratoriums prevented many lenders and banks from starting the foreclosure process on distressed homeowners. The moves served as a safety net for homeowners and were intended to prevent another housing crisis, like the one we saw in 2008. However, it is worth noting that foreclosures started to creep up towards the end of the year, when assistance began to expire.

According to ATTOM Data Solutions’ last Foreclosure Market Report, “lenders started the foreclosure process on 25,209 U.S. properties in Q3 2021, up 32 percent from the previous quarter and up 67 percent from a year ago — the first double-digit quarterly percent increase since 2014.”

Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company, has confirmed the reasoning behind the latest increase. According to Sharga, “Mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. So it’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.”

Not unlike most of its other metropolitan counterparts, the Kansas City real estate market will most likely see an increase in foreclosure filings. As more distressed homeowners are asked to come current, filings will almost certainly increase. While it’s too soon to tell just how many foreclosures will be filed in Kansas City, it is safe to say there will be more than last year.

“So far the government and the mortgage industry have worked together to do an extraordinary job of preventing millions of unnecessary foreclosures using the foreclosure moratorium and mortgage forbearance program,” Sharga added. “But there are hundreds of thousands of borrowers scheduled to exit forbearance in the next two months, and it’s possible that we might see a higher percentage of those borrowers default on their loans.”

Kansas City Median Home Prices In 2022

In the last year, real estate in Kansas City has appreciated as much as 17.6%. At that rate, the Kansas City real estate market slightly trailed the national average. Nonetheless, the median home value in the Kansas City real estate market now sits at $211,571.

For some perspective, real estate in Kansas City has appreciated each year since 2012. In that time, home prices have increased (on average) upwards of 109.4%. The median home value in the United States, on the other hand, increased 96.7% over the same period of time. The reason for the higher rate of appreciation may be attributed to Kansas City’s employment rate. With a better-than-average unemployment rate, more people have made the move to homeownership over the last decade.

Higher rates of employment, combined with the city’s low inventory level, have driven prices up almost exponentially. Competition has enabled homeowners to increase prices accordingly, which begs the question: Is it a good time to buy a house in Kansas City? The answer will depend on the timing of the purchase. Those looking to buy sooner rather than later will find today to be a great time to buy a house in Kansas City. If for nothing else, interest rates are near historic lows, and the inventory crunch is likely to drive prices higher for the foreseeable future. Experts expect homes to appreciate an additional 15.4% in the coming year, and there’s nothing to suggest they are wrong. As long as inventory levels remain as low as they currently are and demand remains healthy, prices will rise.

Still, today’s rate of appreciation is unsustainable, and prospective buyers are already being priced out of the market. Once new builds are brought to the market, real estate in Kansas City will correct itself. The shift is likely years away, but those afforded the time may find better prices in three to four years.

kansas city home prices

Should You Invest In The Kansas City Housing Market?

The Kansas City real estate investing community is currently the beneficiary of some rather favorable indicators. More specifically, market conditions may very well favor investors on both the buying and selling end of transactions. For starters, real estate in Kansas City remains incredibly affordable. While prices have risen at a historic pace over the last year, median home values are still well below the national average, which would suggest investors who can’t afford to operate in more expensive markets may be able to secure a deal in Kansas City.

The same affordability working in favor of Kansas City real estate investors has also helped traditional buyers. The local market recently saw the fifth-largest increase in FHA buyers across the country (many of whom are first-time buyers or can’t afford to put down 20.0% upfront). In fact, 17.6% of all sales were made to buyers with an FHA loan heading into last year. Therefore, investors may simultaneously purchase relatively affordable homes in a market where an increasing number of people are looking for their first houses. The unique combination of affordability and demand should work heavily in favor of the entire Kansas City real estate investing community.

It is worth noting that the introduction of the Coronavirus has shifted the city’s most viable exit strategy from rehabbing to long-term rental properties. First and foremost, nearly a decade’s worth of appreciation has increased home prices to historic levels. As a result, profit margins on flips are growing slimmer. That’s not to say rehabbing isn’t still a great idea in Kansas City, but rather that today’s indicators seem to favor rental properties.

In addition to historical rates of appreciation, it’s never been cheaper to borrow institutional money. The Fed announced it would keep rates low in an attempt to stimulate the housing market in the wake of the pandemic, and they haven’t let buyers down. According to Freddie Mac, the average monthly commitment rate on a 30-year fixed-rate mortgage is 3.56%. To put things into perspective, interest rates are near historic lows, and more people are expressing an interest in buying.

Low interest rates will simultaneously help investors justify today’s higher home prices and reduce their monthly mortgage obligations. In doing so, the prospects of renting a property to tenants become a lot more attractive. Lower monthly mortgage payments are easier to offset with rental cash flow, and investors may find it easier to pay down their mortgages with other people’s money.

Another factor contributing to the attractiveness of building a rental property portfolio in Kansas City is supply and demand. To be clear, there aren’t enough homes in Kansas City to keep up with demand, especially after the drop in interest rates. With half the year remaining, Kansas City only has about 0.7 months of supply. Traditionally, a healthy market has about six months of inventory, which leaves real estate in Kansas City well short. As a result, more people will be forced to continue renting, whether they can afford to buy or not. The demand for rental properties will not only help avoid vacancies, but it may even increase cash flow for investors.

The unique combination of indicators created in the wake of the pandemic has made rental properties in Kansas City more attractive than ever. Today, investors who can put money to work now may be happy they did, even just a few years from now.

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real estate in kansas city

Top Reasons To Invest In Kansas City Real Estate

The Kansas City real estate market offers just as many reasons to invest in real estate as today’s best markets. In addition to boasting national benefits like attractive interest rates and plenty of demand, the Kansas City housing market also offers the following:

  • Low Unemployment

  • Fast Growth

  • High Quality Of Life

  • Low Cost Of Living

  • Attractive Renters’ Markets

Low Unemployment Rate In Kansas City

Not surprisingly, the pandemic caused a surge in unemployment over the last two years. Once COVID-19 was declared a global emergency, the unemployment rate in the United States jumped from 4.4% in March 2020 to 14.7% in as little as a month. At the same time Kansas City’s unemployment rate jumped from 4.0% to 13.2%. The increases were understandably similar, but Kansas City has fared much better than the national average since the initial spike. Today, Kansas City’s unemployment rate is somewhere in the neighborhood of 2.7%, below pre-pandemic levels. The high percentage of employed individuals has served as a catalyst for the housing sector, and should continue doing so moving forward.

Fast Growth In Kansas City Is Expected

The pandemic has altered the general publics’ view on homeownership. In particular, work-from-home trends are allowing more and more people to trade expensive living situations for more affordable alternatives. Primary cities across the country are experiencing net losses in migration as residents pack up and leave for places like Kansas City. With a median home value that’s about $109,091 less than the national average and plenty of employment opportunities, Kansas City is becoming the beneficiary of positive net migration.

High Quality Of Life In Kansas City

In addition to providing more affordable housing than most of the country’s primary cities, Kansas City also has a high quality of life. According to U.S. News, Kansas City is ranked number 57 on the “Best Places To Live” in the country list. The placement on the list is largely due to the better-than-average job market and affordable housing. Still, Kansas City is a vibrant community with plenty to offer anyone that chooses to call it home.

Low Cost Of Living In Kansas City

The unique convergence of affordable housing, employment opportunities and income standards have made the Kansas City housing market relatively affordable when compared to most of its peers. According to U.S. News, “Kansas City offers a better value than similarly sized metro areas when you compare housing costs to median household income.” Looking forward, local home prices aren’t expected to appreciate as much as the median home value in the United States, which bodes well for local homeowners and their bank accounts.

Attractive Renters’ Market

Rental markets are growing more and more attractive across the United States. As more people are priced out of the housing market, or simply can’t compete with all of the competition, the demand for rental units will increase. Rental demand is increasing everywhere, and the Kansas City housing market is no exception. Asking rental rates have already increased 9.6% year over year, and the next 12 months will look to continue the momentum. In fact, rates are expected to increase more than their home price counterparts, as more people are forced to rent.

Summary

The Kansas City real estate market has enjoyed a good run for the better part of a decade. Moving forward, appreciation rates are expected to run up for at least a year, which may spark near-term activity. As a result, the demand from new buyers should remain intact and help the city weather the current storm. More importantly, however, is the disruption onset by the Coronavirus. While the pandemic was unwelcome, it may have actually generated a great opportunity for everyone in the market.

Have you thought about investing in the Kansas City real estate market? If so, what are you waiting for? We would love to know your thoughts on real estate in Kansas City in the comments below:


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Sources

https://www.zillow.com/kansas-city-mo/home-values/
https://www.zillow.com/home-values/
https://www.zillow.com/research/data/
http://www.freddiemac.com/pmms/
https://realestate.usnews.com/places/missouri/kansas-city
https://www.zumper.com/blog/kansas-city-metro-report/
https://www.redfin.com/news/data-center/
https://kcrar.stats.showingtime.com/docs/mmi/x/KansasCityRegionalAssociationofREALTORS?src=map
https://www.bls.gov/eag/eag.mo_kansascity_msa.htm
https://www.census.gov/quickfacts/kansascitycitymissouri
https://www.attomdata.com/news/market-trends/foreclosures/attom-september-and-q3-2021-u-s-foreclosure-market-report/
https://www.attomdata.com/news/market-trends/home-sales-prices/attom-data-solutions-2021-rental-affordability-report/
https://www.attomdata.com/news/market-trends/foreclosures/attom-november-2021-u-s-foreclosure-market-report/

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