“The combination of rising mortgage rates and persistently increasing property values has been reducing affordability, making it difficult for many potential buyers, especially first-time home buyers, to enter the market in recent years. However, there is some optimism for the near future: If mortgage rates remain below 7%, we may see an increase in loan applications and approval rates in 2024.”
-Anat Nusinovich, Economist for the National Association of REALTORS
This is great news! Many home buyers have been sitting on the fence for nearly two years. Ditto homes sellers who either bought or re-financed at an interest rate below 4.0%. Many of those home owners are would-be sellers if not for the current high interest rate environment (referred to as the “lock-in effect”).
But here is good ‘ol Lawrence, KS, this good news is muted by two local realities: taxes and affordability. Local headlines have been filled with talk of rising property taxes. Even without actual mil levy increases, city and county governments are taking in more and more property taxes based on rapidly rising home values alone. But no matter how much more they take in, it just never seems to be enough!
Which leads straight into the conversation regarding affordability. This topic of conversation is long past any level of reality. There is no true “affordable housing” in Lawrence, KS available to purchase. Nearly everything, for one reason or another, is beyond “affordable” for the average buyer.
Many residents are feeling the squeeze. Before long, we will start to see some residents priced out of their homes. This is probably already underway and probably has been for a bit. Rising cost of groceries plus rising cost of housing hurts everyone, but mostly and firstly it hurts those most vulnerable. An elderly couple previously intending to age-in-place may be having to reevaluate their plans.
Why is this? There are several reasons. Lawrence has long been known to have cost prohibitions built into the process. It costs more to build in Douglas County than elsewhere, simple as that. The city refuses to responsibly annex needed land, and so home building has been grinding to a halt for years. It’s very nearly at a full stop.
What happens when you under-build? Cost goes up. What happens when cost goes up? Taxes go up. Cost of living increases, affordability decreases. Add, rinse, repeat.
So, while rates are coming down and that’s a great reason to celebrate, any celebrations in Lawrence should remain strictly sober for the foreseeable future. It’ll be a long time before the benefits reach those who need it most. If it ever does at all.
Original quote appeared in this article: https://www.nar.realtor/blogs/economists-outlook/hmda-and-housing-demand
-Ryan Desch, Broker/Owner R+K Real Estate Solutions / Regional Vice President Kansas Association of Realtors
