Although home sales in Kansas are down significantly from a year ago, the real estate market in Lawrence appears stable and in better shape than the rest of the state.
"Our marketplace is very healthy," said Gary Nuzum, managing broker at McGrew Real Estate. "It's a price-sensitive market, not a seller's market. We're fortunate that there are a lot of buyers looking for bargains."
A report from the National Association of Realtors last week showed that sales of existing homes in Kansas had dropped 22.4 percent in the second quarter of 1990 compared with the same period in 1989. However, sales of both new and existing homes in Lawrence, increased 2.5 percent during the same period, Nuzum said.
Nuzum said Lawrence's home sales for this year have kept pace with last year's level. Through July, 358 homes had been sold in Lawrence, compared to 360 at the same time in 1989. More importantly, he said, the inventory of homes had dropped 20.2 percent, from 500 to 399, in the same period.
"We were overbuilt in 1988," he said. "But the surplus has now been absorbed into the market.
NUZUM SAID the 399 homes on the market represented a six-month inventory, which was a favorable level for Lawrence's market. In Kansas City, he said, some price ranges have a two and three-year inventory.
Although the sales and inventory numbers reflected stability in the Lawrence's housing situation, Nuzum said he wanted to stress that the city's real estate market had changed.
"Lawrence has always been an interest-driven market," he said. "That's not true in 1990. Now it's price-driven.
"Buyers are cautious. Buyers are researching homes thoroughly and are very price-sensitive. It's not a seller's market. I don't think there is a seller's market nationwide."
The greatest demand is for homes priced between $40,000 and $120,000, Nuzum said. Homes priced right have sold quickly, he said, and overpriced homes have taken much longer to sell. He described the market for homes that cost more than $180,000 as "socked."
INTEREST rates have remained steady in 1990. Although interest rates rose from 9.75 percent to 10 percent last week for a 30-year, fixed-rate loan, Rick Goodrum, loan officer at Capitol Federal Savings and Loan Assn., said the rate had stayed in the 9 to 10 percent range all year.
The company's loan business, he said, has picked up recently.
"They've been more in spurts instead of a static, busy season," Goodrum said.
Bonnie Augustine, executive vice president for the Savings Bank of Lawrence, said that her institution's rate on a 30-year fixed-rate loan also increased to 10 percent last week. She added that the Savings Bank also offered a 15-year fixed loan at 9.75 percent, with a 2 percent fee, and a 30-year loan that was fixed at 9.5 percent for seven years with a renegotiated rate for the remaining 23 years.
NUZUM SUMMED up the mortgage rates as very advantageous for buyers.
"It's a great time for buyers to be buyers," he said.
But it's not necessarily as good a time for builders to be builders in Lawrence. The decrease in home inventory levels has come at the expense of the contractors who enjoyed busy years in 1988 and 1989.
Michael Green, owner of Mylan Associates, a Lawrence home building firm, said his company was doing 60 percent to 70 percent of the business it had last year. The drop forced him to cut back his staff by six or seven people, he said, and now he employs three people.
Despite the slowdown, Green said he felt fortunate with the level of business his company had maintained.
"I am very pleased with the amount of work we're doing now compared to last year," he said, and added that perhaps they had too much work in 1989.
Green maintained, however, that he did not think Lawrence had overbuilt.
"I think a year and a half to two years ago we had an inventory problem, but it's been taken care of through liquidation," he said. "We're on balance right now. Demand is keeping up with supply, and there's been a good demand."
GALE LANTIS, president of Joel Fritzel Construction Co., a contractor of custom-built homes, said he had seen a rapid decline in demand for their product.
"It started late last year and early this year, and has continued on being slow," he said. "Usually we see an increase in the spring and summer."
Lantis was reluctant to say that Lawrence wad overbuilt, and said an unstable economy is to blame for his company's slowdown.
"People are a little uneasy," he said. "They don't seem to be willing to make a move."
But despite the drop in volume reported by some builders, single-family home construction appears to be expanding in Lawrence this year.
The number of building permits issued by the city for new single-family home construction during the first seven months of this year is 33 percent higher than for the same period in 1989. Through July of this year, the city building inspector's office issued 165 permits for new homes, compared with 124 for same period one year ago.
THE SLOWDOWN some Lawrence builders say they are experiencing has been felt much more accutely by both construction firms and real estate companies statewide. Green called Lawrence an "isolated oasis" for new home construction.
Jim Mayer, executive vice president for the Kansas Association of Realtors, agreed.
"Lawrence may be one of the better markets in Kansas," Mayer said. "It has held its own and been a good market through the ups and downs of the last 10 years."
Hard hit areas, he said, included Johnson County, Wichita and, to a lesser extent, Topeka. Mayer said the real estate market in Johnson County was off because fewer companies were putting regional offices in the area because of Kansas' tax situation, and that the area was probably overbuilt.
Mayer said he was concerned with the 22.4 percent decrease in Kansas home sales, which was the third highest in the nation, behind only Delaware's 27.9 percent drop and Massachusetts' 25 percent loss. He added that he did not forsee an immediate improvement for the state.
"I DON'T SEE how we can have a turnaround until we get some relief from the tax situation," Mayer said.
Mayer pointed to the 1986 Tax Reform Act and the state's reappraisal and reclassification efforts in 1989 as placing a double burden on Kansas homeowners.
The 1986 Act, he said, took $50 billion away from the real estate industry nationwide by eliminating writeoffs in commercial real estate, which curtailed building in Kansas. Add to that the state's reappraisal, which raised taxes on some real estate from 150 percent to 500 percent, Mayer said, and you have a trickle-down effect that affects homeowners.
In spite of his gloomy outlook for Kansas, Mayer remained optimistic when speaking of real estate prospects for Lawrence.
"Lawrence continues to grow," he said. "The 10 highway to the east has opened things up unbelievably. I know people are building in the west side, but I see residential areas expanding in the east, too. Lawrence will develop along the corridor, and the housing will be right behind it.
"Lawrence is just sitting in a tremendous area for expansion and growth, there's no two ways about that. It is a unique city in Kansas."