Forecast: Wichita home values rising again

A report released Thursday predicts Wichita home values will continue to rise through 2016.

Values in the area will increase by 3 percent next year, according to the 2016 Kansas Housing Markets Forecast, an annual report commissioned by the Wichita State University Center for Real Estate.

“Home price appreciation has returned,” said Stan Longhofer, director of the center. “I think that is the biggest positive coming out of the forecast.

“For several years, as sales increased and inventories got tighter, we kept saying, ‘Boy, we’re not seeing home prices increase even though inventories are tight.’ Well, now we are seeing that.”

Now several years removed from the national housing crisis, Longhofer said the prediction comes after home values rose by an average of 3 percent last year, beating the center’s initial forecast of 0.2 percent for 2014.

Though it originally predicted homes in the Wichita metropolitan would appreciate by 1.3 percent for 2015, Longhofer said it now looks like values could rise as much as 3.6 percent this year.

“At the end of last year, appreciation finished out at 3 percent, which is the best number we’ve seen since before the housing crisis,” Longhofer said. “We see good, modest appreciation numbers that are consistent with a solid, stable and healthy housing market.

“It’s not too hot and not too cold – it’s a little bit Goldilocks.”

Part of the reason for the current and expected rise, according to the 16-page report, is a result of “tight inventories” of homes available for sale. Statewide, the report predicts that home values will rise 4.7 percent in 2016.

“I think the predictions in the forecast are right on,” said Greg Fox, broker/owner of Better Homes and Gardens Real Estate Alliance in Wichita. “I think home prices will continue to rise as long as we have low inventory.

“When you have people begging to buy a house, you will have appreciation value across the board.”

Following a slow first quarter this year, the report says that Wichita home sales are expected to increase 4.6 percent this year. For 2016, sales are predicted to rise 3.3 percent to close to 10,000 units.

“Home sales continue a steady little upward trend for most markets around the state, including Wichita,” Longhofer said. “Year over year sales levels continue to be at solid levels, but not blockbuster levels.

“In some ways, the market is kind of boring, which I think is a healthy thing. Across the board (in Kansas), we’re in the fifth year of a market that has been steadily churning.”

When it comes to sales of new dwellings, the story is slightly different, Longhofer said. New home construction in Wichita rose in 2014 to just more than 1,000 units, the report states, and is projected to increase to about 1,065 units for 2016.

For the 10 years ending in 2009, the Wichita metro area averaged 2,263 new home permits annually, according to numbers provided by the Wichita Area Builders Association. Beginning in 2010, however, that yearly number didn’t get back to the four-digit threshold until last last year when 1,012 permits were issued.

“We’ve been kind of bopping around that 1,000 number for a while,” Longhofer said. “The new home market is still facing some constraints in terms of financing and ability to develop lots.

“New home activity has not recovered nearly as strongly as the existing home market. As existing home values go up, though, that will make the calculus a little more affordable in terms of the new homes.”

Unless a tsunami of new jobs sweeps across Wichita in the near future, Fox said that he expects new home starts to continue to be timid, at least compared to pre-recession levels.

“I think new homes are going continue to be a big problem,” Fox said. “Part of it may be a lack of outside industry coming in – if our population isn’t growing significantly, do we need a lot of new housing?

“An even larger part, though, might be the fact that the cost of building a home rose quite a bit while existing home values didn’t rise for several years. If we suddenly had 50,000 new jobs in Wichita because a new industry moved here and moved all their employees, we might see a bigger rise in new homes.”

Alissa Unruh, a realtor with J.P. Weigand & Sons in Wichita, said the report underscores the fact it’s an exciting time for the market, but also cautioned that every individual property is unique.

“Sellers should still remain cautiously optimistic,” Unruh said. “They should not automatically assume a 3, 4 percent appreciation in their particular property.

“There are so many individual scenarios where homes can take up to nine-plus months to sell. There are just too many factors that effect values and appreciation to assume all homes will fall under this market forecast.”

This story was originally published October 15, 2015 at 12:04 AM with the headline "Forecast: Wichita home values rising again."