photo by: Chad Lawhorn/Journal-World

Stan Longhofer, director of the WSU Center for Real Estate, is pictured Oct. 6, 2023 at the Lawrence Housing Market Forecast event at the Arterra Event Gallery in west Lawrence.

If you are buying a home right now, finding one is only half the battle. Surviving the sticker shock that comes with 30-year mortgage rates at or near 7% is quite a chore itself.

Next year is when that sticker shock will begin to fade, one of Kansas’ leading real estate economists is now predicting.

But no, that doesn’t mean you should expect a dramatic decline in interest rates. Rather, it simply means that resignation will start winning the day.

“People are going to get used to the fact that we are in a new era of interest rates,” Stan Longhofer, director of the Wichita State Center for Real Estate, told a Lawrence crowd of real estate agents at a meeting last week. “I think we will acclimate to it.”

Longhofer is predicting that 30-year mortgage rates will be around the 6% mark at the end of 2024, which is in line with the National Association of Realtors’ forecast. That in turn will slowly start bringing home buyers back to the market, Longhofer is predicting.

Longhofer is forecasting home sales in Lawrence and other metro markets in Kansas to be largely flat in 2024. Holding steady would be a victory for most housing markets, currently. Every major metro market in the state is expected to experience a decline in home sales of 10% or more this year. Lawrence is on pace to experience its third consecutive year of declining home sales.

While 2024 may not be the year that many metro areas see a big breakthrough in home sales, Longhofer is forecasting it will be the year when the stage is set for the next surge. He’s predicting that 2024 will produce an increase in home building permits, which will eventually turn into new home sales, in most markets across the state.

Most markets. Lawrence is the one exception. While Longhofer is predicting an increase in building activity in Kansas City, Topeka, Wichita and Manhattan, he thinks Lawrence’s home building scene will be steady, at best.

Longhofer said he can’t make himself predict an increase in Lawrence construction, in part, because there have been so many years that the metrics say more homes should be constructed in Lawrence, yet such construction never materializes.

“We’ve had such low building activity for such a long time,” Longhofer said. “We’ve had about 15 years where we haven’t been building enough homes to keep up with demand.”

That has created a situation where Lawrence has a “really, really low” supply of homes for sale, and they sell “really, really fast,” Longhofer said. One result has been predictable enough: Home prices are among the highest in the state.

According to data presented by Longhofer, Lawrence ended 2022 with an average selling price of $331,883. That was about $5,000 less than the average selling price in the Kansas City, Kan./Mo. metro area. However, Lawrence’s average selling price was about $94,000 more than the metro area that was next closest in price, Manhattan. It was about $124,000 more than the average selling price in Topeka and about $95,000 more than the average selling price in Wichita.

Longhofer’s annual forecast presentation, which was sponsored by the Lawrence Board of Realtors on Friday, didn’t go into many specifics about why Lawrence builders aren’t constructing more new homes in the market. However, local real estate leaders over the past several years have offered many theories before. Those include a shortage of building lots, and raw land prices that are too high to support the building of homes in the $200,000 to $250,000 range, which better match what Lawrence incomes will support than the nearly $400,000 homes that often are built in the city.

Difficulty in winning approval to expand the city limits for new housing also has been cited. City leaders, however, have taken steps to expand in recent months. The most recent is a proposed development at U.S. Highway 59 and the South Lawrence Trafficway. Land on the southeast corner of the intersection recently was annexed into the city limits. City officials in the coming months are expected to hear rezoning requests that would allow for new single-family and multi-family housing on the 177-acre site, in addition to retail and hotel development. If approved, the project is expected to produce more than 150 building lots for new homes in the next year.

If that project and others — there’s some home construction possible north of Rock Chalk Park — come to fruition, Longhofer’s prediction for status quo building activity may be off. Regardless, Longhofer told the crowd that it “will take a long time” for Lawrence to build up a normal supply of housing inventory. In normal times, a market will have at any given time a number of houses on the market equal to about four to six months worth of home sales. Lawrence hasn’t had that level of inventory since 2014, Longhofer said.

As a result, Longhofer said he doesn’t see a scenario where Lawrence housing prices will start to decline at any point in the foreseeable future. He said housing prices likely will start growing at a slower rate, but any thoughts that high interest rates will push down demand for housing enough that prices actually drop is off base, he said.

“Home prices are not about to fall,” he said.

Here’s a look at some figures from WSU’s annual forecast for the Lawrence market:

• Home sales in 2024 are expected to fall by less than 1% from 2023 totals. However, it is notable that Longhofer is predicting only a 12% decline in home sales in 2023. Through August, Lawrence home sales have fallen 26% compared to a year ago. Longhofer is predicting the slowdown won’t be as severe this fall.

• Housing prices are expected to increase by 4.4% in 2024. Longhofer is predicting housing prices in 2023 will finish the year up by 5.4% from 2022 totals.

• Lawrence’s projected 4.4% increase in home prices is the largest of any metro market in the state in 2024. Kansas City is projected to increase 3.7%, Manhattan 2.7%, Topeka 3.1% and Wichita 3.4%.