Wichita’s housing market is still hot, but what about future sales — and appraisals?

Nationally, the housing market may be experiencing a correction, but in Wichita, there’s still a boom on.

That’s because the greater Wichita area is still seriously short of houses, so it comes down to supply and demand.

“It’s economics 101,” said John McKenzie, president and CEO of Coldwell Banker Plaza Real Estate, who is in his 50th year in real estate.

He said the past 24 months — particularly the past 12 months — are like nothing he’s seen before. That includes potential buyers “crawling all over each other other” at a home with 18 showings in a day and, in some cases, houses selling for double their asking prices.

McKenzie said some two-bedroom, one-bath houses that used to be in the mid $70,000 to low $80,000 range have been selling for $140,00 to $150,000.

“It’s just absolutely nutty,” he said. “Until we get inventory up, we’re going to continue to see the market that we’re in.”

It likely will be slightly less crazy — that’s even though houses still are staying on the market an average of only five days — because interest rates are now more than 5% instead of more like 3% last year.

“No one’s buying to take advantage of interest rates anymore,” said Pam Flesher, a broker with J.P. Weigand & Sons.

She said that knocks out a lot of buyers.

Finding a house to buy is “going to be a little bit easier than it was in the spring.”

She said between February and May — particularly March — the market was the hottest that she’s seen it.

Some houses gained $100,000 in value from where they were two or three years ago.

It remains a seller’s market, Flesher said.

“It’s just not maybe going to be the frenzy.”

On a recent weekend, Amelia Sumerell of the A-Team at Coldwell Banker sold three houses in the range of $250,000 to $400,000. All three had multiple offers and sold over their listing prices. Some included appraisal gap coverage, which is when a buyer pays out of pocket to make up the gap between what a property is appraised for and what a mortgage lender will finance for a sale that comes in higher than an appraisal. Some included escalation clauses, which is when a buyer has an automatic built-in offer to bid a certain amount higher than the highest bidder for a house.

“It’s very happy for sellers,” Sumerell said.

The bad news for buyers with homes to unload first is that most sellers still won’t take contingency offers.

Typically, a balanced market is one in which there is four to six months of inventory available. That’s calculated by taking how many houses have an active listing and dividing that by the pace of sales in the past year. So if 1,000 homes are listed, and 200 a month are selling, there’s a five-month supply of inventory.

In the greater Wichita area, that comes out to about 3,000 to 5,000 houses. However, right now in the area there are between 500 and 600 houses available — fewer if you don’t count model homes and those under construction. That’s less than a month’s supply.

Stan Longhofer, director of Wichita State University’s Center for Real Estate, said there’s been a shortage in new home construction since the financial crisis ended in 2010. He said new home permits began topping 1,000 a year only two years ago, and he said there needs to be a minimum of 1,500 for several years before there’s a sufficient supply.

It’s unclear when that may happen.

“I don’t know if we’ll ever see 3,000 houses on the market again,” McKenzie said of a time when there was more like four month’s inventory on the market. “I can’t believe I’m saying that.”

‘Just be thankful’

It’s hard to discuss housing prices these days without mentioning appraisals because a lot of people aren’t happy about how much their appraisals — and therefore taxes — are going up.

“It’s just going to be that way,” McKenzie said of the effect of higher housing prices.

“But I wouldn’t complain. Your house is worth more. Just be thankful.”

A number of people have complained, though.

Of the 1,820 appeals so far this year, about 50% have had their appraisals reduced, according to Sedgwick County appraiser Mark Clark.

“Our job is to find fair market value,” he said.

For people complaining their homes are undervalued — and there are some every year — they can no longer do anything about it until the following year.

The Kansas Legislature in 2021 amended a statute governing appraisals (K.S.A. 79-1448) to prohibit county appraisers from raising a home’s valuation on appeal until the next year’s appraisal cycle on Jan. 1. So Clark said even if someone has evidence that a house should be valued more, he can’t immediately do anything about it.

There are several other issues with appraisals as well, said Brenda Noffert of the Noffert Group within Better Homes and Gardens Real Estate Alliance.

“Unfortunately, appraised values are all over the place,” she said. “Appraisers are still human.”

In some parts of Wichita, appraisals seem to more easily match the increased housing prices. Some brokers who work in affluent areas said they’ve not had issues with appraisals that don’t match sale prices.

In less-expensive areas, appraisals don’t seem to be keeping up as much, Noffert said.

Areas with homes that used to be $40,000 to $60,000 and were primarily rental areas now have investors who want to sell homes for $80,000 — and who have buyers willing to pay that — but Noffert said appraisers come in with much lower appraisals that then keep the areas depressed.

“They’re not seeing the increases that buyers are willing to give,” Noffert said.

That’s news to Clark.

“I wish somebody would come talk to us because we don’t know anything about it.”

Out of compliance

In other areas, Noffert said there is an issue with higher-priced homes affecting comps in neighborhoods — and in turn appraisals, too.

In places where buyers can make up appraisal gaps, properties are selling for thousands — or tens of thousands — over other properties. Those pricier houses then are used as comparable houses to determine value for other home sales and appraisals, which then rise.

Clark said comps are one of the key factors in determining home values.

He further said that there are strict guidelines appraisers must follow, and the state gives him and his counterparts an annual grade.

“A lot of people just think we make this stuff up, and we don’t.”

Clark said all appraisals taken together must stay within 90% to 110% of what a home sells for. If they don’t, his job could be in jeopardy.

Currently, Sedgwick County is at 86%, meaning homes are somewhat undervalued.

“We’re falling out of compliance,” Clark said.

The only way to keep in compliance is for appraisal values to increase. However, if the ratio starts getting much over 100%, Clark would have to consider reducing values.

While he keeps a close watch on the ratio, Clark points out the year is only half over, and only 4,428 houses have been sold in Sedgwick County so far.

What happens with interest rates, the economy or major national or even international events could all affect the ratio.

“As we work through the year and that number of sales increases, and we’re looking at those ratios, the story could change,” Clark said. “I’m not a soothsayer. I don’t make predictions. I let the market tell me what it’s doing.”

Noffert said appraisals can be especially difficult and disheartening for a first-time home buyer who has saved all they can for a down payment and then pays for an appraisal and a home inspection only to find the appraisal is less than the asking price. They then not only can’t get the house, they also can’t get their money back for the appraisal and inspection.

“I don’t want to risk the money that is so important to them,” Noffert said. “That’s the difference between putting gas in their car or not. It’s awful.”

Noffert said she encourages clients to make offers only when she can guarantee the appraisal will come in high enough.

“The most we can do is take our best educated guess based on data and past sales.”

Licking their lips

So what do all these rising home values mean for Wichita’s real estate future, and is the city in danger of losing its reputation as one of the most affordable places to live?

“We will still always be below the marketplace,” McKenzie said. “We’re still the cheapest area in the Midwest.”

People coming in from the coasts “just lick their lips when they come into Wichita,” he said.

Not that there’s a huge influx of people moving here or that many out-of-state investors are buying property here. Noffert said that not more than 3% to 5% of current houses are selling to investors from elsewhere.

However, that “is still three times more than we ever had.”

Better Homes and Gardens owner and broker Greg Fox said that while statistics show that nationally some homes are getting overvalued, that’s not the case in Wichita.

“It is not that you’re paying too much for houses,” Fox said. “The value’s all there.”

He said home prices have gone up about 10% in the last year, and the inflation rate is now more than 8%.

“The housing just kind of elevated to where it possibly should have been two or three years ago because of lack of inventory,” Fox said. “Now we’re having the inflation rate catch up to where the housing is.”

Wichita as a whole used to have an annual housing appreciation rate of 2% to 4%, depending on location, McKenzie said.

“That was barely staying ahead of inflation.”

Sumerell said Wichita is not a market of big highs and lows.

“We’re kind of a little island here.”

She and Noffert said that’s in part because of how fiscally conservative people tend to be here. They don’t buy to their full capacity.

“They aim to pay things off,” Sumerell said.

They’re people who don’t “use their houses as ATM machines,” Noffert said.

“Wichita rolls with changes so much better than most people think they would,” Sumerell said.

Some people are adjusting to the housing market by simply not moving, McKenzie said. Even though they can make more money for their houses than ever before, they have to pay more than ever before, too, so they’re remodeling instead.

In the last 22 months, Noffert said Wichita has seen about a 30% increase in housing prices on average and, since not everyone has been able to get into new homes, almost a 40% jump in rental rates. She said that means Wichita finally is getting rental rates on par with the national average.

“We used to have significantly depressed rental rates.”

‘Oh, my God, what did I do?’

With so much activity and with prices rising so much, there must never have been a better time to be a real estate agent, right?

“It’s great for agents with homes to sell,” Sumerell said. “If you’re a Realtor who just has buyers, it’s heartbreaking.”

It’s also trying and tiring no matter which side you’re on, Flesher said.

“Realtors have not enjoyed this as much as people think we have,” she said. “I would say agents worked twice as hard . . . because of the frenzy.”

Flesher said she’s ready for it to be a more even market.

“Gone are the days where we could set up showings on a Saturday and go see five or six houses,” she said. “Some day maybe (we’ll) go back to seeing five houses that don’t sell in 12 hours.”

Noffert said there still are new buyers every day, but she sees signs the market is easing just a bit.

“It used to be like a fire hose to the face.”

Now, she said some houses that had offers actually are coming back on the market when buyers get cold feet.

“They sleep on it and go, ‘Oh, my God, what did I do? . . . If my offer was the best, then I’m paying too much.’ ”

Noffert said interest rates may not be as “stupid low” as they have been, but she said, “Money is very, very cheap,” and it’s still a good time to buy.

The biggest question is, she said, “Will you be happy enough at that price?”