Kansas Real Estate Market Trends & Analysis


The Kansas real estate market is following in the footsteps of national trends. Just about every indicator shaping today’s real estate landscape is directly correlated to the pandemic and how markets have adjusted to the new environment.

In particular, demand greatly outweighs supply in the Sunflower State. Buyers are incredibly active due to attractive interest rates, the threat of more appreciation, and larger savings accounts following more than two years of “staying at home.” However, there aren’t nearly enough homes to satiate buyers, and the imbalance has led to increased competition and significantly higher home prices.

Higher acquisition costs have shifted how today’s investors look at the market. Instead of working with eroding profit margins on flips and rehabs, many investors are turning to long-term rental properties. That’s not to say Kansas real estate investors can’t flip homes (there’s still plenty of short-term opportunity in the distressed property market), but rather that today’s indicators cater to long-term outlooks.

The Top Kansas Real Estate Markets


While the best real estate market in Kansas is up for debate, here’s a list of the cities investors may want to pay special considerations to:

  • Kansas City

  • Olathe

  • Overland Park

  • Wichita

  • Topeka

Kansas Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Title Companies, Lenders, Real Estate Agents, Attorneys, Independent Escrow Firms
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Judicial
Process Period: 3 - 5 months
Notice of Sale: Sheriff
Redemption Period: Up to 12 Months

Taxes

Income Tax: 2.90% - 5.20%
Corporate Tax: 4 - 7%
Sales Tax: 6.50%
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 1.29%
Property Taxes by County: http://www.tax-rates.org/kansas/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,582.00
Transfer Fee: Mortgage 0.26%
Origination Fee: $1,956.00

Kansas Housing Market Overview


  • Median Home Value: $190,409

  • 1-Year Appreciation Rate: +15.0%

  • Median Sales Price: $264,136

  • Homes Sold: 3,677

  • Median Rent Price: $985

  • Price-To-Rent Ratio: 16.10

  • Active Listings: 4,287

  • Average Days On Market: 30

  • Unemployment Rate: 3.6% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 2,934,582 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $59,597 (latest estimate by the U.S. Census Bureau)

  • Foreclosure Rate: 1 in every 4,256

Kansas Median Home Prices


Median home prices in Kansas have appreciated at a historic pace. Thanks, in large part, to significant tax cut repeals, a growing contingent of Kansas’ workforce has been able to stimulate the state’s economy more so than in the past. With higher wages, lower unemployment, and more opportunities in general, more residents have actively participated in the housing market. That said, inventory levels in Kansas haven’t been able to keep up with today’s growing demand; there aren’t enough listings to make everyone happy. Consequently, homeowners have increased asking prices for the better part of a decade in response to growing competition. Throughout the pandemic, in particular, prices have increased at an even faster rate.

The median home value in the Kansas real estate market is now about $190,409. To be clear, today's price represents a significant jump from the start of the pandemic. In March of 2020, when COVID-19 was declared a global emergency, the median home value in Kansas was about $157,000. In nearly two years, home values in Kansas have increased 21.2%. The increase is primarily due to the imbalance of supply and demand. The lack of available inventory hasn't been able to keep up with buyers, which has created bidding wars that heavily favor sellers.

To put things into perspective, the median home value in the United States increased has increased 26.0% since the beginning of the pandemic. Today, the median home value in the United States is about $316,368.

There's no doubt about it: The pandemic has created nothing less than a seller's market. Competition has enabled owners to increase asking prices, and home values in Kansas are testing new highs each month. However, despite the latest increases, there's no sign of an end to the appreciation anytime soon. Prices will continue to rise as long as inventory remains tight and demand persists. While prices may not increase at the same rate as last year, it's safe to assume a slightly tempered rate will continue moving forward. Nationwide forecasts call for homes to increase as much as 14.3% over the next 12 months, which means homes in Kansas will most likely see a slightly more modest increase.

Kansas Median Rent Prices


The Kansas housing market's latest increase in home values has impacted the local rental market. If for nothing else, higher home values and a lack of listings have prevented a large population of prospective buyers from participating in the market. As a result, many people want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters.

Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. Landlords have found themselves in a position of power in Kansas, and their asking prices reflect as much.

According to the latest data released by Apartment List, the median rent in Kansas has increased 10.1% in the last year and now sits around $985. The latest increase in rents hasn't kept pace with home value appreciation over the last year. As a result, renters can expect to pay the following in rents (for now):

  • Studio: $762

  • 1-Bedroom: $770

  • 2-Bedroom: $978

  • 3-Bedroom: $1,176

  • 4-Bedroom: $1,389


For context, the national average rent price is about $1,309, or 32.8% higher than the average renter pays in the Kansas housing market. The difference is noticeable, and appreciation forecasts suggest the discrepancy will only grow for the foreseeable future. As long as inventory remains tight, landlords will be able to justify rent increases. That said, the Kansas real estate investing community still has time to get into the long-term rental space.

Kansas Foreclosure Trends & Statistics


According to ATTOM Data Solutions’ Year-End 2021 U.S. Foreclosure Market Report, 151,153 U.S. properties were reported to have received default notices, been sold at auction, or were repossessed by the bank in 2021, "down 29 percent from 2020 and down 95 percent from a peak of nearly 2.9 million in 2010, to the lowest level since tracking began in 2005."

Despite expectations that foreclosures would rise exponentially, filings remained relatively low throughout 2021. “The COVID-19 foreclosure tsunami that some people had anticipated is clearly not happening,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “Government and mortgage industry efforts have prevented millions of unnecessary foreclosures, and while it’s likely that we’ll see a slight increase in the first quarter, we probably won’t see foreclosure activity back to normal levels before the end of 2022.”

However, it is important to note that while foreclosures were down in 2021, they started to increase in the final quarter. As foreclosure moratoriums expired and government assistance ended, more distressed homeowners found themselves in the foreclosure process. More importantly, it's safe to assume the momentum will continue in Kansas in 2022. If last year was any indication, however, the Kansas real estate market will see a lower foreclosure rate than many of its statewide counterparts.

Tax Lien Investing


  • Tax Lien or Deed: Tax Deed Sale

  • Interest Rate: N/A

  • Redemption Period: 2 years for vacant land; 3 years for improved property

Kansas Real Estate Investing


Investing in real estate with any degree of success is contingent on several factors. However, there’s one universal “rule of thumb” that takes precedence over just about everything else: attractive profit margins. A deal must show there’s room for profit for investors to consider it worthwhile. With that in mind, Kansas real estate investors should pay special considerations to the state’s distressed property inventory.

Distressed assets award savvy investors with higher profit margins than their traditional counterparts. Distressed homes are particularly coveted at a time when the median home value in Kansas has increased 15.0% in as few as 12 months. That said, the recent moratorium on foreclosures has significantly reduced the number of distressed homes in Kansas. As recently as the first half of last year, few states saw a steeper year-over-year decline in total foreclosures than Kansas. Total foreclosures declined 65.8% from the first six months of 2020 to the first six months of 2021. While we are still waiting for data concerning Kansas foreclosures in the second half of last year, nationwide trends saw a decline. Therefore, it's safe to assume Kansas' already low foreclosure rate will get even lower before it starts to increase again. As a result, finding distressed properties to invest in may be more challenging than in recent history.

With fewer distressed homes on the market and profit margins on traditional sales eroding, the Kansas real estate investing community is turning to another strategy: long-term rental properties. Buy and hold rental properties offer investors the ability to offset today’s high prices with equally impressive rental rates. Given the right property with a proper cash flow, there’s no reason to avoid homes that cost considerably more than they did one year ago. Rent checks could easily make the acquisition well worth the price in a relatively short period.

In addition to increasing rental rates, real estate investors in Kansas will find today's borrowing costs offer a unique advantage. With the average commitment rate on a 30-yer loan somewhere in the neighborhood of 3.5%, borrowing money remains affordable. Though rates have increased year to date, they can still offset higher acquisition costs and increase monthly cash flow from properties placed in operation. Consequently, if borrowers can lower their monthly mortgage obligations, they can pocket more of the money they earn in rent.

Lastly, the Kansas housing market currently boasts a price-to-rent ratio of 16.10; that means it's more affordable to rent than own. The cost of renting relative to owning will inherently drive more people into the rental market, which will significantly reduce the risk of investors' greatest fear: vacancy.

Kansas Housing Market Predictions


For investors to maintain an edge over the competition, they need to keep an ear to the ground and anticipate market shifts. While it’s impossible to make Kansas real estate predictions without an inherent degree of error, it’s entirely possible to make educated guesses based on data and facts. It is important to note, however, that educated guesses are just that: guesses. Any attempt to predict the Kansas real estate market needs to be complemented by an equally impressive sense of humility; knowing how likely something is to happen is just as important as knowing what may happen.

Let’s take a look at what is most likely to happen in the Kansas real estate market over the next year:

  • Borrowing Costs Will Increase Gradually: In an attempt to combat inflation, interest rates have risen steeply in the first part of 2022. The latest increase is merely the first of several, however, as the Fed has already announced 2022 may see as many as four rate hikes. Today, the average commitment rate on a 30-year fixed loan is 3.45%. While it's too soon to tell how high rates will go, it's safe to assume they will increase gradually over the next 12 months. The gradual nature of the increase will most likely bring more buyers to the market, as more people will look to lock in lower borrowing costs in Kansas.

  • Home Values Will Rise: This is probably the most likely to come true of all the Kansas real estate market predictions one can make. There isn’t enough inventory to meet current demand, which allows homeowners to drive up prices in the face of steep competition. Combined with a strengthening economy and low interest rates, that should increase the number of buyers actively participating in the market. Until there is enough inventory to satisfy demand, it looks like prices will continue to rise.

  • Buyers Will Favor Secondary Cities: While considered relatively affordable on a national level, the Kansas housing market is testing new highs with each passing month. In particular, primary cities are becoming prohibitively expensive. As a result, more people are looking to trade their expensive city confines for more affordable suburban alternatives. Additionally, the work-from-home trend enables more people to pack up and move. Therefore, 2022 should see more Kansas residents move to smaller cities with more affordable living arrangements.

Summary


The Kansas real estate market has received a great deal of help from a strengthening economy and vice versa. The two have worked together to create the perfect storm, and every indicator suggests the two will continue to prevail for the foreseeable future. Real estate in Kansas, in particular, looks as if it will remain healthy and active. Buyers should still be able to find relatively affordable homes, sellers will find themselves with plenty of offers, and investors should continue to capitalize on a healthy market. All things considered, the Kansas housing market is firing on all cylinders.

Sources:



https://www.zillow.com/ks/home-values/
https://www.zillow.com/home-values/
https://www.census.gov/quickfacts/fact/table/KS/PST045218
https://www.bls.gov/regions/mountain-plains/kansas.htm#eag
http://www.freddiemac.com/pmms/
https://www.apartmentlist.com/research/category/data-rent-estimates
https://kansasrealtor.com/kansas-housing-market-stats-november-2021/
https://www.attomdata.com/news/market-trends/foreclosures/attom-year-end-2021-u-s-foreclosure-market-report/
https://www.attomdata.com/news/most-recent/attom-mid-year-2021-u-s-foreclosure-market-report/

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