Falling supply of homes for sale n KC

Posted on Wed, Dec. 19, 2007

Falling supply of homes for sale raises hopes for KC housing market

By CHRIS LESTERThe Kansas City Star

The total supply of homes for sale in the Kansas City area during November dipped below 20,000 for the first time since March, raising hopes for an improving real estate market.
The Kansas City Regional Association of Realtors reported Wednesday that the total inventory of new homes for sale declined in November to 4,773, down 14.5 percent from a year earlier. Existing home inventory in November stood at 14,731, down 11.7 percent from the recent peak in August.

It remains a buyer’s market, with 11.1 months of supply of new homes at the current sales pace and 8.4 months of supply of existing homes. But recent tightening suggests the area market is moving back toward a more even balance between buyers and sellers.

“It’s a positive,” said Kelley Babb, president with K.C. Builders & Design, which built about 45 homes in Johnson County this year. “These numbers sound good to me. This goes to show the stability of the Kansas City market. It’s still a fair place to live. We just overbuilt for so many years, and the market is correcting.”

The average sales price of 431 new homes sold in the area during November was $291,015, up 3.4 percent from a year earlier, according to the regional group. The average price of 1,747 existing homes sold during the month was $154,789, up 1.2 percent from a year earlier.
Separately, the Home Builders Association of Greater Kansas City reported that area residential building permit activity declined in November after a surprisingly strong October.
A seasonally adjusted total of 423 single-family housing units were permitted in an eight-county area last month, down 23.5 percent from a revised total of 553 units issued in October. November activity was down 31.3 percent from 616 units during the same month a year earlier.

Slowing construction activity reflects a concerted effort among local builders to work off an accumulation of unsold inventory available for sale. During the first 11 months of the year, area builders have obtained permits for 5,926 single-family units, down nearly 33 percent from the same period last year.

One result is that new-home inventory in the area has declined in 11 of the last 12 months. The supply of new homes on the market — obtained by dividing the inventory by the recent sales rate — was 11.1 months in November, down from a recent peak of 14.4 months in September and 12.1 months of supply in November 2006.

The housing industry considers anything above a six-month supply available for sale as constituting a buyer’s market. Forecasts call for new-home starts to remain subdued going into early 2008.

Home builders point to declining mortgage rates and a recent Mid-America Regional Council forecast that the local economy will outperform the slowing national economy next year as indications the area housing market will recover in 2008.

“Lower interest rates, improved housing affordability and a growing job supply are critical to boosting new-home ownership,” said Tim Underwood, HBA executive vice president and CEO, in a statement accompanying the monthly permit report.

“It is taking longer than many of us expected for consumers to respond to the factors in their favor in the current housing market,” Underwood said. “The optimism is that sales will pick up after the new year. The recent favorable news regarding interest rates and the local economy should ease concerns about a downturn and highlight the opportunities available for new-home buyers.”

Kansas City leads the list of top-permitting area cities with 1,207 single-family homes permitted year to date through November. Olathe ranks second with 574 units, followed by Lee’s Summit with 476. Rounding out the top 10 are Overland Park, 338 units; Kansas City, Kan./Wyandotte Co., 318; Blue Springs, 236; Platte County, 217; Shawnee, 213; Gardner, 208; and Lenexa, 207.

INSIDE Media coverage makes the housing market seem worse than it is, an economist says. C3