Housing on the Upswing

The real estate market in the metro area this year is likely to mirror the fable “The Tortoise and the Hare:” slow and steady, but that's what wins the race.

Though prices and sales may be down and lending still tight, things began to look up in 2009, and there are signs of hope for both sellers and buyers in 2010. The government tax credit for homebuyers and low interest rates are helping boost sales; the National Association of Realtors (NAR) is forecasting that home sales will go up this year and next.

In 2009, housing sales were up by 15 percent nationwide, according to NAR. In Missouri, sales increased 1.8 percent over the year, while in Kansas they dropped by 3.3 percent. The organization's forward-looking indicator (based on contracts signed at the end of 2009) showed contracts down 16 percent but still 15 percent higher than at the end of 2008.

Marjorie Kennamore, real estate agent with Prudential Kansas City Realty and Hallbrook Realty and developer of Tuscany Reserve, admits that sales are down but says that activity is “markedly up.” “What people are doing is poising themselves to purchase. People are sensing that the market may be bottoming out and they want to snag before it rises again,” she explains.

Resales

In the Midwest, the prospects are possibly the best in the nation, according to Realty Times. Nationally, existing home sales were up by about 10 percent at the end of 2009 — the best market since early 2007.

In late 2009, existing home sales in the Midwest increased by 14.4, up more than 25 percent from the same time the previous year. The South saw a 12-percent increase, with 11 percent in the Northeast and only 1 percent in the West.

Suzy Goldstein, an agent also with Prudential Kansas City Realty and Hallbrook Realty, says she doesn't want to sound like the voice of “doom and gloom,” but this is the most challenging market she has seen in her more than 25 years in the industry.

But she also had a good year in 2009 and hits on her website have been high.

“It's a great time to buy because there are a lot of sellers in the marketplace who are ready to make some aggressive moves to get their homes sold,” she says. With prices low, buyers can afford more in the metropolitan area than they could in recent years.
 
And for smart sellers, it could be a good time to put a house on the market. Sellers in all markets are going to have to be realistic about housing prices and prospects for selling — real estate is a price war and beauty contest, Goldstein says, and you have to win at least one of them.

Kennamore agrees, saying that selling a house can take twice as long now as it used to but that eventually they do sell.

“[Sellers] need to not feel like it is a problem to market a house for nine months instead of six months,” she says.

New Construction

While resales may be looking up, new construction isn't quite there yet. The good news, though, is that inventory has been falling, so eventually building will need to resume to avoid a near-future housing shortage.

Realty Times reported a small drop in inventory nationally at the end of 2009, but a double-digit drop from 2008.

“The most impactful thing in this cycle is we had way too much inventory and it changed how people buy, builders sell and banks finance,” says Dan Whitney, president and owner of Landmarketing.

Whitney says a high point hit when there were almost 5,000 finished, unoccupied homes in the local market. At the first of the year, it was down to about 1,600, though an optimal number would be about 800.

“We have gotten rid of so many homes,” he says. “It was a crash diet and it wasn't fun, but when we reach our goal, hopefully we will feel better.”

The Kansas City market is currently smaller than both Omaha and Des Moines when looking at homes under construction, Whitney says, whereas it used to be almost two times the size of both.

Lending for builders is also still down because banks are concerned with foreclosures, but Kennamore says this is a “correction that is settling in” to help eventually correct the market.

“There is a different feeling than this time last year,” she says. “We all seem to feel that we aren't looking at quite as big a mountain to climb.”

Whitney also says he is encouraged by the change he has seen in builders in response to the market. Because buyers are overall more frugal now, builders are “altering their product” to adapt by creating smaller, less expensive homes that are “better designed for today's buyer.”

“I do think there will be an increase, and it will be gradual,” he says. “By the end of the year, people will be a whole lot more optimistic.”

This article originally appeared in the March/April 2010 issue of Kansas City Homes & Gardens.