Wichita-area home sales trending upward
07/14/2013 7:44 AM
07/14/2013 7:44 AM
Since October 2012, the Wichita metro area has seen consistent increases in year-over-year home sales.
Area real estate officials said what’s fueling the recent trend is a slowly improving economy and, perhaps more important, a general acceptance that more potential home buyers are feeling better about their own financial situation and their ability to take on a mortgage for the first time or, for others, a bigger monthly mortgage payment.
To be sure, the economic recovery locally and across the country is not anywhere near as robust as previous recoveries. Unemployment, for instance, has improved, but it remains high.
“I think we’ve been in a wait-and-see mode for so long that people who are pretty confident about their own situation … are not letting fear about someone else’s (job situation) hold them back,” said Stan Longhofer, an economist and director of Wichita State University’s Center for Real Estate.
Longhofer bets that area home sales will continue to rise – even in the face of rising interest rates, which have become an increasing likelihood in recent weeks.
“I think there’s a lot of room for us to see some sustained, steady growth in housing market for foreseeable future,” he said.
Others in the industry, like Realty World Alliance broker Greg Fox, aren’t as confident.
“I think this is normal,” Fox said. “We’ve returned to normal. How long we stay at normal, that’s the question we all are asking.”
According to the South Central Kansas Multiple Listing Service, area home sales in 2012 totaled 8,181 units, a 9 percent increase from 2011. But that number is far lower than that seen in the peak year of area home sales – 12,278 units sold in 2006.
Tessa Hultz, CEO of the MLS and the Wichita Area Association of Realtors, said 2006 was the best year for area sales since 2000.
Not only does Longhofer think local home buyers are more optimistic about their job security, but slowly rising home prices are giving existing homeowners a reason to buy that move-up house. They likely have more equity in their house than they had five or six years ago, and with rising prices, it’s more likely that they can sell for more. That means they can bring more cash to the table for a bigger house, he said.
Gary Walker, vice president and general manager of J.P. Weigand & Sons’ residential division, said he is hopeful for continuing home sales increases.
He and and other real estate officials agree that the recent trend in higher home sales is more genuine than the last housing boom in 2006 and 2007.
There are no more no-money-down mortgages, Longhofer said, and no bubbles being created by buyers and investors buying homes for the sake of getting a good return on their investment.
“The good thing to me is we’re not seeing anything artificial driving the market … the reckless lending practices that led to the disaster we ended up running into in 2009,” Walker said. “There’s a lot of reasons to be optimistic that it will continue at the current rate,” Walker said.
But Walker’s level of confidence in sustained sales increases is not as high as Longhofer’s.
“What could kill it is if inflation starts kicking in big time and interest rates start spiraling up at a higher rate,” Walker said.
Tim Wooding, president of Executive Mortgage Group, said he thinks rates will increase, but slowly. There may be days where rates will spike, but settle down the next day, he said. The longer-term rate increases will “be very gradual,” Wooding said. “We’re not going to be hitting double digits by the end of month.”
“But I don’t think we’re going to see interest rates back into the middle or low 3s,” he added.
Wooding said although it is generally easier to get a mortgage today than three years ago, “the criteria is still tougher” than it was six years ago, before the financial crisis and recession.
Longhofer said potential home buyers can withstand an increase of almost 2 percent in interest rates.
“Rising interest rates of 3.5 percent to 4 percent and 4.5 percent to 5 percent are not going to keep people from being able to afford a house,” he said. “It may change the (price) of the house they are looking at, but it won’t knock people out of the market.”
Increases of more than 5 percent are possible, and if that happens it could dampen home sales, Longhofer said. But even at a rate of as much as 7.5 percent, there will still be demand for houses.
“People need houses,” he said. “First and foremost, housing is a consumption good. It’s where we live and that need doesn’t go away.”
Walker, of J.P. Weigand, worries that although an increase of even 1 or 2 percent may not affect buyers who are moving up to bigger houses, it could thwart some first-time home buyers.
“I think the impact will be on the first-time buyer that has very little cash to put down,” he said.
Realty World’s Fox, like Walker, is encouraged by the direction of the area home sales market. “I think this is just the normal cycle returning,” he said. But Fox added that he’s not sure how easily the market could shrug off the extra weight of higher interest rates, a bump in inflation, a stalling job market or a retraction in consumer confidence.
“I don’t have a crystal ball,” he said.