When will high home prices come down? Maybe they won’t, says Wichita State economist
The rising prices of Wichita-area homes have to come down sometime, right?
Not necessarily so, says Wichita State University Economist Jeremy Hill.
Today’s housing prices — and construction costs for new homes — may wind up changing the way Wichitans look at some neighborhoods that haven’t gotten much attention for the last several decades, said Hill, executive director of the WSU Center for Economic Development and Business Research.
“We don’t have the labor to build our way out of this,” he said. “And if we can’t build our way out . . . maybe our preferences are going to change.”
Hill spoke Thursday at a budget retreat for Sedgwick County commissioners.
For the past several years, Wichita builders have constructed mostly higher-income homes because they couldn’t make money on cheaper homes.
Couple that with an increase in materials costs and a shortage of construction workers and low-to middle-income buyers may have to turn their attention to existing housing stock to find something they can afford, even if it’s not the kind of house they expected to be able to buy.
Hill said he expects more interest to arise for “airplane bungalows,” smaller, older homes that were built for aircraft workers decades ago.
“We’re going to have to turn those around because there is no other option,” he said.
It’s a familiar pattern that’s taken place in larger cities, such as Atlanta and Seattle.
A December report by the Kansas Housing Resource Corp. showed the median age of homes in Sedgwick County landed in the decade of 1960-1970.
That same report said “after a decline during the 2008 recession, median prices of existing homes are increasing at a faster pace than ever before” with “fewer new housing options on the market as compared to before 2008.”
The median sales price of a home in the Wichita area in January was $182,000, up from $139,000 in 2019. The average price was $220,000 in January, up from $159,000 in 2019.
Across the Midwest, the price for an existing home is about $60,000 less than new construction, the report said.
“Prior to the construction industry supply chain issues in 2020/2021, buying a new home may have started to become an option as incomes rose for some households,” the report said. But since the slowdown caused by the COVID pandemic “more people (are) competing for the same units or moving out of the region.”
Hill said he and Stanley Longhofer, WSU’s real estate expert, traveled around Kansas talking to real estate agents and bankers about the rising prices.
“They said look at our history,” Hill said. “We’ve never been this high. How can we support home prices at this level?”
Hill said he sees no reason the prices won’t stick. Buyers have the money to spend; lenders aren’t writing risky mortgages and demand for houses remains sky-high.
A few years ago in Wichita, it took on average four months to sell a house. Now it takes four days, he said.
But even with housing prices that are high by Kansas standards, Wichita is still playing catch-up with most of America.
The national average price for a more or less mid-level executive home is $398,000. An identical home with the same square footage and finish would cost only $269,000.
Even in humble Topeka, that identical home would be $353,000, Hill said.
“Maybe in Wichita and in Kansas, our problem is we’ve never kept up with the nation,” Hill said. “We didn’t have the price bubble, we didn’t have the bust and we’ve never really kept up with housing prices.”
This story was originally published February 17, 2022 at 3:41 PM.
