There’s never been a better time to sell a house in Wichita — except for one thing

For Wichitans looking to sell their homes, there’s never been a better time, real estate experts say.

There’s just one thing: Where will sellers go?

“Our problem is we don’t have a lot of inventory,” said John McKenzie, president and CEO of Coldwell Plaza Real Estate. “It’s a supply-and-demand issue. It’s a very, very basic economic issue.”

In a balanced market, there’s a 6-month supply of houses.

Now, though, McKenzie said, “If we don’t list another home, in 1.6 months, we will be out of inventory completely.”

Real estate agents are using words such as crazy, wild and brutal to describe how buyers are swarming houses.

“I’ve been having to do a lot of life coaching and pep talking with people to just hang in there,” said Ben Meyer of ERA Great American Realty.

One client offered $10,000 above a $120,000 asking price and waived repairs.

“Someone else beat us because they went $15,000 with cash, as is,” Meyer said. “It gets kind of disheartening.”

Heather Holmes of Realty Executives Sudduth Realty was amazed what happened after listing a Butler County property.

“Over the next 24 hours, we had 21 showing requests and seven offers.”

Lynette Chapman of Lynette Chapman Real Estate listed a house for almost $180,000 that not only had numerous scheduled showings in one day, “There were, like, people waiting outside . . . to try to sneak in and see it. It’s just nuts.”

The seller got an immediate seven offers, two with escalation clauses that allowed potential buyers to keep bidding higher, and sold for $15,000 over the asking price.

“I’ve been surprised just because of everything that’s been going on with the pandemic,” Chapman said.

COVID-19 has had an impact, but it wasn’t as devastating as the real estate community braced itself for.

“I really expected things to shut down and just kind of halt, and they never really did,” said Sheila Rumsey, CEO of Realtors of South Central Kansas, a real estate trade association for agents in Sedgwick, Harvey, Butler and Cowley counties.

“It was pretty much constant activity,” Rumsey said. “It was a lesser degree, but it just continued.”

Coronavirus fears caused — and continue to cause — some sellers to hold off putting their houses on the market, but the inventory issue existed well before that.

Long-term issue in Wichita area

A curious Greg Fox, broker and owner at Better Homes and Gardens Real Estate Alliance, last week went back and checked MLS — multiple listing services — statistics for the greater Wichita metropolitan area from 2001 to 2015.

“I found on average we have 3,300 active listings on the last day of the month.”

The numbers over that time period swung from a low of 2,800 to a high of 4,200.

“At the end of this May, we had 1,100 active listings,” Fox said.

The 1,100 listings were 36% below last May.

The inventory issue is acute in the $150,000 to $400,000 range, said Cindy Carnahan of the Carnahan Group at ReeceNichols of South Central Kansas.

“It’s been going on for about three years.”

One problem, she said, is, “We don’t have the kind of land we need to build that price range of homes.”

New construction costs are another issue, Fox said.

He said the average price to buy an older home in the $200,000 to $250,000 range is about $92 a square foot. He said new construction costs an average of $145 a square foot.

“So you get in kind of this vicious circle of how can I find something to move into, and I can’t afford to build a new one.”

Fox said another issue could be that “it used to be people would move every six years. Now the average is 10 nationally.”

Then there are what Carnahan calls “crazy low” interest rates, some of which are in the 2.85% range.

“The young people are trying to get into the market with these low interest rates, and there’s more of them than there are houses to buy,” Carnahan said.

She said there are routinely multiple offers on houses $200,000 and below.

“The multiple-offer situation is just totally out of control,” said DeLaine Lacey, the broker at the west J.P. Weigand & Sons office.

“The homes don’t even have to be in as good of condition as they have in the past.”

Homes at about $325,000 and up take longer to sell, Fox said.

“The market slows down up there, but everything below that’s just zipping out the door.”

The fix for inventory issue

So what will fix the inventory issue? Appreciation, said Stan Longhofer, director of the Center for Real Estate at Wichita State University.

“Our homes are just too cheap,” he said. “They’re still really, really affordable home prices.”

Longhofer said $150,000 homes need to appreciate to $200,000, and $250,000 homes need to get to $300,000 or $350,000.

In the greater Wichita area, appreciation rates are 4% on average.

“Healthy, but not spectacular rates,” Longhofer said.

Like Fox, he noted the challenge of construction costs going up about the same amount.

In the $200,000 range, he said, “It’s hard to build a new home . . . that really competes with what you can buy in existing homes.”

Longhofer said he believes coronavirus shutdowns “severely exacerbated” the inventory situation.

In May, he said the number of house contracts written was up 13.3% over last May.

“The demand was pent up.”

He said he expects to see a sharp spike in sales in June and July because of it, which he said will make the market even tighter.

Longhofer said he’s not sure the current 1.6-month supply tells the whole story about the Wichita area’s inventory. He said some of the homes still on the market are the ones that no one wanted.

“It’s like the end-of-the-year clearance closeout rack.”

The real estate community measures balance in a market by a month’s supply of homes. Longhofer said to arrive at the balance, take the number of active listings divided by the pace of sales for 12 months.

For instance, if 1,000 homes are available and on average 200 homes a month are selling over a year’s time, 1,000 divided by 200 equals a 5-month supply — meaning if homes sell at the same pace, it will take five months to go through the inventory.

Currently in the Wichita area, different price points tell different stories.

In the $150,000 to $175,000 range, there’s just over a half-month’s supply of houses. It’s similar in ranges just above and below that as well.

At $750,000, though, there’s a 14-month supply.

At over $1 million, there’s a 30-month supply.

What to do if buying or selling

Traditionally, Longhofer said, the theory is more than a 6-month supply helps buyers, and less than a 4-month supply is a tight market that favors sellers.

However, there’s nothing traditional about this moment in real estate history in Wichita.

“It sounds like a sales pitch, but for both buyers and sellers, it is really a good time to get out there,” Lacey said. “Grab these low interest rates.”

For anyone nervous about selling, most everyone — including Longhofer, who is not in sales — agrees now is the time.

“Man, I would call my Realtor today, and I would get it listed,” he said. “Your opportunities to sell have never been better.”

He said a buyer who finds a home should nab it and then worry about selling if needed. In the unlikely event there’s not a quick sale, then bridge loans or other loans with minimal down payments can help, though Longhofer admitted that “it’s a little nerve wracking.”

Fox said that “if I had a house to sell right now . . . I’d figure out where to rent for a while if I had to.”

“Because the houses are selling so much more over asking price and value at this point, you’re going to make money.”

Holmes said “online tools are really important right now because people want to see things from their house.”

McKenzie’s advice to buyers is to act quickly if they see something they want.

“You can’t hesitate.”

Some agents say it’s best to have cash and be able to make a decision almost instantly — even within an hour.

McKenzie said to get preapproved from a qualified lender and give an offer with earnest money.

Chapman said conventional loans seem to be easier than FHA ones, which can have a more stringent appraisal process and may cause some sellers to go with another buyer.

Contingencies — which are usually clauses that say sales won’t go through unless buyers are able to sell their houses, too — also are out these days.

What’s in is that a lot of people are reconsidering their homes and where they want to be.

Richelle Knotts, general manager of ReeceNichols and the current board president of the South Central Kansas MLS, said a lot of people are stuck at home and rethinking how and where they want to live.

“Home has become more important to people right now.”

Rumsey said what area of the country people live in also is a consideration. She said she was on a recent call with industry experts who are predicting that some people will move from big cities on the coasts to the Midwest since the coronavirus shutdowns have proven they can work from anywhere.

Carnahan thinks that will be the case, too.

“I honestly think we’re going to have people gravitate back to the Midwest.”

Or, more specifically, she said, right here.

“Wichita has done a beautiful job of weathering a lot of storms.”

This story was originally published June 14, 2020 at 4:42 AM.