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November 2023 Real Estate Market Update for Greater Kansas City
Dated: December 15 2023
November 2023 Market Numbers for the Kansas City area are out and here is what we have according to our Heartland MLS.
Overall, November saw a decrease in closed units compared to this time last year. There were 2,489 closed sales in 2023 compared to 2,749 in 2022. Our days on market are seeing a welcome (from buyers) 15.6% increase to 37 days versus 32. It may not seem like a big difference, but when buyers have been clawing and competing for homes just to have them fly off the market from sight-unseen buyers – a little relief can be felt for a long time.
In 2022, we saw the sticker shock of not only home prices but interest rates alike. Buyers took some time to get used the “new normal” of rates not being in the 3%, 4%, and 5% ranges. We are seeing the buyers come around to the idea of purchasing despite our average sales price being up 9.6%, the pending sales are also up 1.3%.
Now, those numbers detailed are a combined new construction and resale; however, we are in a market that those two categories and their statistics are very different. Here is how the breakdown looks:
For Existing Homes:
Closed Sales were down 8.9% to 2,260 units in November 2023 versus 2,480 units in November 2022. Our average sales price shows no signs of slowing down – which is what we have been warning buyers about and have had home sellers cheesing for a long time (and predicting will be happy for many more months to come). Our average sales price is up an astonishing 12.2% to $335,591 versus $299,223 a year ago. What we are seeing in the negative is our pending sales and inventory. Our pending sales are less than 1% down, however our inventory is down 5.2% with 236 less units than a year ago. When you look at the supply increase and days on market increase, you wonder how that can be – but, having less inventory and more supply means there are fewer buyers in the market. Buyers for months (turning into years) have been saying that they want to “wait until rates come down” or “wait until prices crash." The fact of the matter is, that we have no indication that home prices are going to drop anytime in the next several years. All indications continue to show homeowners should expect positive equity growth for the foreseeable future. Now, nobody has that crystal ball – and all of these predictions may be completely wrong; with that being said, we work on history and data and what we have predicted has shown to be accurate the last 21 months. What we do fear for buyers who “want to wait” is that when interest rates begin to fall more (and we expect them to) we will see a flood in the market of buyers wanting to purchase. If the home you want to purchase has 3-4+ offers, you can expect to pay more for that home, possibly waive contingencies you otherwise didn’t want to, and you may not be the winning bid. It may greatly give you an advantage to buy now, look at paying the extra interest rates (or look at temporary buy-down options), and then refinance when rates drop to a level you desire for your payments.
Now, let's look at the New Homes and what is happening with that part of our market.
New Homes Market:
The new construction market took a 14.9% hit on closed units in November 2023 compared to November 2022. This was a bit surprising considering October saw a 37.6% increase in pending sales; however, just because a new construction home is “pending” does not mean it will close in 21-45 days which is so common in resale. A new construction home can be “pending” for 3, 6, or more months depending on what phase of the build it is in; and nobody bats an eye. Welcome news for builders and what they plan on putting into their 2024 inventory is the average sales price is up .6%. A new construction home in the KC market will cost you an average of $616,649. So much for that “midwestern affordability" when the average sales price in the US for a newly built home was $503,900 in Fall 2023 as reported by the US Census Bureau.
Builders have been methodical in 2023 to unload some of their sitting inventory but have needed to do so creatively without slashing prices. Incentives were offered left and right to potential buyers including design and finish credits, extras such as landscape, basement finishes in whole or part, model furniture at no charge, etc. It has been a priority to not lower the prices of models that had previously sold for as much or more in the same subdivisions but also because looking ahead, if builders just went in and started slashing prices, they would likely experience big trouble in the busy Spring 2024 market when they wanted to increase home prices again and appraisers were comparing them to models the builders slashed prices on to unload inventory in 2023. A seller's high motivation to sell and lower the price does not mean an appraiser will forgive the price and not consider that home comparable to others in the near future. Not to mention, though relief has been seen in the cost of goods; builders are still paying so much more than they did just a few years ago for the same project. So, to protect their future builds, they got buyers excited with incentives that didn’t include price drops. Their strategy worked and inventory for November 2023 is down 12.8% compared to this time last year.
Overall, the market in Kansas City is still considerably active and busy. Buyers and sellers alike are enjoying the projection of growth. Sellers love they can tap into the equity they have built over the years and buyers enjoy the peace of mind knowing that KC is a place where they can establish roots and enjoy their own home, all while expecting the market to move their overall net worth forward through homeownership and price gains.
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