photo by: Chad Lawhorn/Journal-World

Construction crews work on new single-family housing on Oct. 27, 2023, just east of O'Connell Road on 26th Street Terrace in Lawrence.

As the calendar turned to fall, Lawrence’s housing market simply continued its fall. Home sales in September fell by 17% compared with a year ago and, in a sign of the times, that double-digit decline actually could be counted as an improvement.

Lawrence home sales were down 45% in July and 23% in August, so the 17% decline last month could be a sign that the worst is over for the local housing market. But that is far different from saying the market is rebounding.

Lawrence is almost certain to experience its third consecutive year of declining home sales. With nine months now in the books, home sales year to date are down 25% and are about 230 sales behind where they were a year ago. They are about 335 sales below where they were in 2021.

For years, Lawrence’s housing market has struggled with having enough homes available for sale, which has depressed overall home sale numbers. Low inventories continue to be an issue, but real estate agents now are finding that buyers are more reluctant as well, given rising interest rates.

Real estate agents now find themselves needing to give some encouragement to people to get into the market. In the monthly report of the Lawrence Board of Realtors, association president Brian Johnson warned buyers that mortgage interest rates are expected to be at higher levels for the “foreseeable future.”

“Buyers should not hold out for lower rates while home prices continue to increase,” Johnson said in the report. “Buyers are better off buying with higher interest rates and refinancing if rates drop, rather than hold out for a lower rate and face higher purchase prices.”

Potential buyers who played the rate game over the last month have indeed been on the losing side, thus far. Rates for a 30-year mortgage in the first week of September averaged 7.12%, according to data from the Federal Reserve. This week they averaged 7.79%, according to the same data.

Another way to look at it is that in a little more than a month’s time, the difference in interest rates has added nearly $140 to the monthly mortgage payment on a $300,000 home loan.

One notable development in all this is that as home buyers have become more reluctant, selling prices have started to moderate. No, they have not started to fall in Lawrence. Expecting declining home prices in Lawrence would be like expecting a fall season without leaves on the ground, pumpkin spice on a menu or an injured KU quarterback on the sidelines.

But it is accurate to say Lawrence home prices are not rising nearly as quickly as they have the last couple of years. September’s numbers reinforced that finding. The median selling price for a Lawrence home in September was $302,500, an increase of 4%. In September 2022, home prices increased nearly 13%, so that is a big difference.

The more meaningful numbers, though, are year-to-date figures, which are less susceptible to anomalies. Those numbers show an even more pronounced moderation. For the year, the median selling price in Lawrence was $302,500, which is up just 2.5% from a year ago. Compare that with the same period in 2021 and 2020, when home prices in both years were up 12%.

It looks very likely that Lawrence will experience its slowest rate of home price growth in at least three years. That should be notable for all homeowners — regardless of whether they are selling their homes — because those selling prices factor heavily into how the county appraiser sets tax values for homes. The change of value notices are mailed in March, and if current trends hold, you would think homeowners would see less of an increase in their tax values than has been the case recently.

In case you are wondering, the 2.5% increase in median selling prices is roughly in line with what is happening in the larger Kansas City metro market next door. According to statistics from the Kansas City Regional Association of Realtors, the median selling price in the metro is up 2.1% from a year ago.

However, it is worth noting that the median selling price for a home in Kansas City is $295,950 thus far in 2023. In other words, in the larger Kansas City metro area — where wages are higher — the average home is selling for about $7,000 less than the average home in Lawrence. It is statistics like those that are playing into the narrative of Lawrence becoming an unaffordable market.

Real estate professionals have said the most likely way that narrative will change is an increase in the supply of homes that makes the Lawrence market less tight and less competitive. The latest report shows that while homes sales are falling, the market remains very competitive among buyers who are in it. The average number of days a home sits on the market before selling thus far in 2023 is 18 days. For comparison, that average in the Kansas City market is 36 days.

photo by: Chad Lawhorn/Journal-World

Construction crews work on new single-family housing on Oct. 27, 2023, just east of O’Connell Road on 26th Street Terrace in Lawrence.

The best news on that front didn’t show up in the Realtors monthly report, but rather can be found in a City Hall building permit report. The city has released building permit numbers for August, and they show something we haven’t seen in a long time: a surge in single-family building activity.

The city issued permits for 41 new single-family homes in August. That was the highest number of single-family building permits issued in any one month in at least 10 years, which is as far back as I was easily able to access data.

That is significant news, but not “problem solved” type of news. The 41 new single-family permits in August likely will save 2023 from being a truly abysmal year on the home construction front, but the year may still well end up below average.

Here’s some perspective: From 2014 to 2021, the city averaged 143 new single-family permits per year. Many in the industry bemoaned those numbers because Lawrence in the 1990s and 2000s averaged much closer to 300 new single- family homes per year.

But then 2022 came. Lawrence issued just 79 single-family building permits, which we reported was the lowest total on record in the city. In other words, home construction fell almost by half compared with an average that already was viewed as historically week.

Turn the calendar to 2023, the situation, until August, appeared to be getting worse. Prior to the August surge, Lawrence was on pace to issue 56 single-family building permits for the entire year.

With the August surge now in the books, Lawrence has issued 74 single-family building permits in 2023. The odds appear good that Lawrence will top last year’s total of 79 single-family building permits.

However, it is still possible that 2023 ends up being the second worst year on record for single-family home construction. Whether August’s surge is the beginning of a trend or a blip will be the determinant.

In terms of where this August building surge occurred, the city’s reports show almost all the new activity is along O’Connell Drive in eastern Lawrence. As we’ve reported, Lawrence businessman Roger Johnson broke ground on new streets to expand the neighborhood he started several years ago south and east of 23rd and O’Connell. With that street work now in, building permits for the houses are being issued, with Neighbors Construction pulling permits for 38 homes in the area in August.

photo by: Google maps

The area marked with a star is the site where the city issued building permits for nearly 40 new single-family homes in August 2023.