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2023 predictions for Kansas City real estate

Real estate experts explain what KC home buyers should know, predicting what will happen with prices in 2023.

Photo of a two-story blue house for sale

Going once? Going twice?

Photo by KCtoday

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There aren’t enough flame emojis to describe KC’s housing market. In 2022, the median home in the metro sold for $335,918, an 11% jump year-over-year. For context, normal yearly appreciation is ~6%. Yowza. 🔥

For those hoping to dip their toes in the home buying waters soon, it helps to know what trends to expect.

The 2023 buying trend

To counteract rising rents, there’s a new trend where people are buying homes with their friends at record rates.

“People are pooling together, kind of crowd sourcing, buying homes with friends or non-family members,” Christian Barnes, president and CEO of Better Homes and Gardens Real Estate Kansas City Homes, said.

Barnes said 18% of home purchases in the last six months were like this. She expects that to increase.

Another trend in 2023 will likely be less competition.

“Buyers are not going to have to get quite as aggressive,” she said.

Waiting on interest rates?

Industry leaders tend to agree on the big picture, according to Forbes; interest rates look about ready to level off. Some expect 6-7% by the end of 2023, while others hope for slightly better. Barnes predicted 2023 will get under 5%.

However, the market is still acting a bit like the Mamba at Worlds of Fun, so potential buyers and sellers are holding off — especially compared to those 3% rates we saw a couple years ago.

Interest rates may still make mortgages seem scary, but how do they compare to renting?

Renting

Right now, Barnes said it’s actually more expensive to rent long-term than it is to buy. That’s backed up by data from the Mid-American Regional Council: local average incomes grew 12% from 2019 to 2022, and rent grew 20%. Meanwhile, the Kansas City Association of Realtors reported the annual home price grew ~15%.

Realtor.com reported average KC rent prices fell slightly the past few months. However, it’s still up 8.7% year-to-year.

Although it may be scary for first-time owners to make the plunge (and there’s certainly more upkeep in owning), Barnes said it might be a smarter financial decision.

Look out for the ‘burbs

According the Heartland Multiple Listings Service, most of the pending sales right now are concentrated in the suburbs. That means areas in Liberty, Olathe, and Overland Park could continue to see heavy house buying activity — especially with new potential housing developments on the horizon.

Some of these areas, especially on the outskirts of the Kansas suburbs, have seen 10%+ increases in home value over the past 12 months.

Don’t give up on south and east KC

Buyers hoping to find areas with less competition may want to think about getting a sweet pad just outside of downtown. The listings map shows a decrease in value for homes on KC’s Eastside as well as the Kansas side of the state line — from Roeland Park through Overland Park.

Conversely, there have been major increases in home valuation across KCK, Brookside, and the Red Bridge area (so if location matters more than price, that’s where to look).

By the numbers

Barnes provided us with lots of information dating back to 2019 — the last “normal” home buying year.

Number of homes sold

  • 2022: 41,940 (projected)
  • 2021: 46,485
  • 2019: 41,594

Total metro sales

  • 2022: $14.09 billion (projected)
  • 2021: $14.05 billion
  • 2019: $10.2 billion

Prices have increased, but the inventory retreated to pre-pandemic levels. Barnes said inventory was really low at the beginning of 2022, but it has started to climb back up in the past six months.

The supply + demand problem

“A lot of inventory will hinge on building and new construction,” Barnes said.

She said the entire housing market saw a 10% sales reduction year-over-year in 2022. Remember, 2021 was an abnormal year.

In November, KCMO voters approved a bond issue authorizing $50 million for affordable housing, which will go towards the city’s goal of 5,000 units by 2025. Other major housing projects could provide major boosts to inventory in the coming years.

Other financials to consider: Adjustable-rate mortgages (ARMs), Federal Housing Admission loans (FHAs), and conforming conventional loans have all increased.

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