Kansas City Homeowners Reluctant to Sell Amid Foreclosure Concerns

The real estate market in Kansas City is going through a crisis. Homeowners are hesitant to sell due to the low-interest mortgages secured during the pandemic, making them cautious about taking on higher rates.

If you intend to buy a house in Kansas City today, prepare for very limited options. Real estate professionals point out that current homeowners, benefiting from historically low mortgage rates, are not willing to sell their properties as they would face the higher interest rates of the current market.

According to a recent report, 433 homes were sold in Kansas City last month, marking a 13% decrease compared to the previous year. Meanwhile, new home construction is on the rise, with the Heartland Multiple Listing Service recording 638 residential construction permits issued in the Kansas City area during the first months of 2024, nearly double the number from the previous year. However, builders say that rising labor and material costs make it difficult to meet demand, putting affordability out of reach for many first-time buyers.

The same report noted that the median sale price of a home in Kansas City reached $250,000, an 11% increase from the previous year. Data indicates that the lack of existing homes on the market is driving up prices.

The trend of large corporate investors buying single-family homes to convert them into rentals intensifies competition among buyers. Housing experts say that homeowners’ reluctance to sell further restricts the market and drives prices even higher, as many of these homeowners enjoy very low mortgage rates granted during the pandemic, around 2.5%, and if they buy a new house, their rate will be between 6% and 8%.

An example of this situation is Maret Cissner, who owns two units within a four-unit cooperative and lives in one. She bought her property in 2016 and has been searching for a larger space to work from home for a year. But as a pianist and visual artist, obtaining a loan is difficult because banks do not consider freelance income the same as a salary, despite earning around $50,000 and having a mortgage of $400 per month with a 4.5% interest rate.

According to data from the Heartland Multiple Listing Service, last February saw a rebound in existing home sales, although specialists say that winter months are usually slow, but even so, the early part of the year at least hints at a change.

When asked if new home construction is the answer to the housing shortage in Kansas City, these are almost always more expensive than resale homes, as builders say they are now more expensive to produce than in the past, with some vacant lots in the Kansas City market costing around $100,000 and rising labor and material costs continuing to drive prices up.

Builders also say that navigating construction rules that vary from city to city makes it even more difficult to meet demand. For example, by September 2023, Kansas City saw a dramatic drop in construction permits, with a 22% decrease.

Builders also say that the new code increases construction costs. Previously, a housing plan could be duplicated as long as the original model received a permit. But the IECC’s focus on site-specific energy efficiency means a plan would need adjustments based on the lot’s orientation.

Available Foreclosures:

Kansas City: 150 homes available.

By Elias DaSilva | October 16, 2024.