The ‘average’ Lawrence home is now selling for $35,000 more than it did just a year ago, according to new report
We’ve got our first look at home sales statistics that include Lawrence’s busy spring home-buying season, and they show that home prices are soaring at a rate not often seen in the city.
The Lawrence Board of Realtors has released statistics for home sales through April, and they show the median selling price for a home in Lawrence is up by nearly 20 percent compared with the same four-month period a year ago.
The median selling price in Lawrence thus far in 2018 is $212,500, up from $177,250 during the same period a year ago. Rising home prices aren’t new to Lawrence. Last year people began labeling the Lawrence market as a hot one because home prices were up by about 6 percent. But now, that growth rate has more than tripled.
To put it in perspective, a person looking to buy an average Lawrence home — whatever that is — should expect to pay an extra $35,250 for that home. To put that in further perspective, a 30-year mortgage at 4.25 percent interest on a $177,250 home is $872. On a $212,500 home, the same mortgage would cost $1,045 a month.
Now, these are averages, meaning not every home in Lawrence has seen this type of increase. Chris Earl, supervising broker and co-owner of Stephens Real Estate, said homeowners should remember that point. He said a fair amount of the price increase is driven by the fact that there are very few homes that are being sold in the $150,000 and below price range. That’s not necessarily because those homes don’t exist. Rather because of low interest rates, there are many first-time homebuyers who are choosing to skip the “starter home” and make their first home a $200,000-plus home that traditionally has been one or two levels above a starter home.
But even with that caveat, Earl acknowledged the rising home prices are eye-opening.
“I don’t think this is sustainable long term,” Earl said. “Eventually, the price will outpace people’s ability to pay.”
Gary Nuzum, a vice president with McGrew Real Estate and another long-time observer of the Lawrence market, agreed that Lawrence is in an interesting time.
“You’re right that we haven’t seen anything like that in quite awhile,” Nuzum said, noting the price increases are most prevalent in the $125,000 to $275,000 price range. “We would like to see the market change a bit. We would like to see more inventory, but the people who are in their existing homes don’t want to leave very bad.”
If this type of increase in average selling prices does last an entire year, though, it will be interesting to watch how the county appraiser sets property tax values on homes in Lawrence. The law requires the appraiser to set property tax values at a rate that equals what the house supposedly would sell for if it were placed on the market. Last year’s hot market produced some significant increases in property tax values, and it sure seems that the market this year may be even hotter. For folks worried about a big jump in property tax values, there are still several months before those values are set.
Another thing to watch is whether this hot market will cause builders to start constructing a lot more new homes. An imbalance in supply and demand is the major driver of price growth in the Lawrence market. In April, 192 homes were on the market. That’s down from 228 in April 2017 and 250 in April 2016. More telling is how long a home stays on the market before it sells. In April, the average was eight days.
That type of demand traditionally has caused builders to start building more homes. There has not been a boom in new single-family home construction in Lawrence, though. Earl said that is because many of the new homes, especially on the west side of Lawrence, are above $350,000. Homes at that price point are moving much more slowly. Builders likely could do well by building more homes in the $225,000 to $250,000 price range, but the cost of land in west Lawrence makes it difficult to find places to do that. Some east side developments — the new neighborhood southeast of 23rd and O’Connell is an example — have done well. That development is adding a second phase to meet demand, Earl said. But there are fewer pieces of ground that are development-ready on the eastern side of town, although there are signs that developers are looking harder at the possibilities. New houses are being built on property between Louisiana Street and the Menards home improvement center, for example.
Henry Wertin, president of the Lawrence Board of Realtors and an agent with Lawrence-based McGrew Real Estate, said he thinks there is a chance home-building activity may increase in the near term.
“Home ownership continues to be a huge part of the American dream, and with builders becoming more aware of the inventory shortage and buyers being more eager than ever, there continues to be an overall optimism in the air,” Wertin said in a release.
Indeed, there probably are several reasons to be optimistic in the real estate industry right now. Home sales year to date aren’t up a lot. Thus far in 2018, they are up 2.1 percent compared with the same period a year ago. But sales in April grew by more than 4 percent, meaning the market is showing some signs of momentum.
But the bigger number is that even though home sale totals haven’t soared, the total dollar value of homes sold in Lawrence has. Through April, the Board of Realtors reports there has been $83.2 million worth of homes sold in the city. That’s up from $68.3 million a year ago.
For an industry that makes its money off a commission, those numbers are great. But unless wages also dramatically grow in Lawrence, the rising price of housing is likely to pressure other parts of the local economy. It is a situation that bears watching.