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An AdobeStock image shows models of homes.

It is that time of year again where the state’s top housing economists get out the crystal ball to predict what Lawrence’s housing market will be in the coming year.

The crystal ball has a succinct prediction for the Lawrence market: It will be slower than most.

Single-family home sales in Lawrence in 2025 are forecast to decline, according the Wichita State Center for Real Estate, which shared its latest report with Lawrence real estate professionals at an event on Thursday.

Of the state’s five metro markets, only Lawrence and Topeka are expected to have declining home sales in 2025, and Lawrence’s projected decline of 0.9% is the largest in the state.

That projected decline comes even as mortgage interest rates are broadly expected to fall, which should make it financially easier for buyers to purchase new homes. But that theory only works if there are sufficient houses to buy, and the economists at WSU are predicting that again will be Lawrence’s problem.

Lawrence set a new low for single-family housing starts in 2022. While there was a mild rebound in 2023, we reported last month that Lawrence is on pace in 2024 to have its worst year on record for single-family home construction.

The economists at WSU look a little more broadly by gathering data on building permits for the entire county, and believe that countywide the numbers won’t hit a new low in 2024.

“Still, permitting activity remains far below what will be needed to bring housing markets back into balance,” the report found about the Lawrence market.

Here’s a look at what WSU is forecasting in regard to single-family home sale growth for the state’s metropolitan areas and statewide:

• Manhattan: up 11.1%

• Kansas City: up 4.4%

• Wichita: up 2%

• Topeka: down 0.7%

• Lawrence: down 0.9%

• Statewide: up 3.3%

The slowdown in home sales might provide some relief to potential buyers who have complained that prices are too high in the market. No, no one is predicting that home sale prices will drop in Lawrence, but they are forecast to grow more slowly. In fact, WSU is predicting that Lawrence will have the slowest rate of home appreciation growth among all the state’s metros in 2025.

Here’s a look at how much WSU is forecasting home values to rise in 2025:

• Wichita: up 7.7%

• Kansas City: up 5.6%

• Manhattan: up 4.9%

• Topeka: up 4.2%

• Lawrence: up 3.4%

• Statewide: up 6.0%

If that 2025 forecast is remotely accurate for Lawrence, it will be a big change from what Lawrence homeowners have experienced over the past several years. Data compiled by WSU shows that Lawrence home values rose by an average of 11.3% per year from 2021 to 2023. Could home value increases really slow to less than 4%? Prices in 2024 suggest it is possible. Through August, the average selling price of homes in Lawrence is up 4.1% from a year ago.

What does seem clear is that the peak of rapidly increasing housing prices has passed. The WSU data suggests that peak was in 2021 in Lawrence and most other markets. I’m guessing there are many Lawrence residents who believe that Lawrence was maybe the worst in the state for rapidly increasing housing prices. That, however, is not what the WSU data shows. Here’s a look at the three-year annual average — from 2021 through 2023 — for each of the metros and the state:

• Wichita: 12.1%

• Kansas City: 11.7%

• Lawrence: 11.3%

• Topeka: 11.2%

• Manhattan: 7.8%

• Statewide: 10.8%

If anything, Lawrence was average or slightly above it. Of course, just because we weren’t the highest in the state doesn’t mean it wasn’t historically high. An 11% annual increase in home values is off the charts historically. A much more normal rate is 3% to 5%.

But, for this particular time period, Lawrence was not extraordinary when it came to rising home value. Now, in terms of actual prices for homes, Lawrence doesn’t look so ordinary. Instead, according to the WSU data, it looks to have home prices basically equal to the Kansas City metro area — despite Lawrence having a much smaller economy and incomes that are less too. Here’s a look at home price numbers for 2023, as determined by the WSU center:

• Kansas City: $343,656

• Lawrence $340,954

• Manhattan: $255,569

• Wichita: $245,583

• Topeka: $218,424

• Statewide: $299,510

Other items of note in the report include:

• WSU economists are forecasting that mortgage rates will go down as the Federal Reserve continues to cut interest rates. But they also are cautioning buyers that rates won’t plummet. The report notes that the Mortgage Bankers Association is forecasting that 30-year rates will drop to just below 6% by the end of 2025. Nationally, rates currently are at about 6.3%.

• The report is a good reminder of how many people were buying homes during the height of the pandemic, as many people discovered their walk-in closet was not an adequate home office. (I got the broom closet. Second dirtiest cubicle mates I’ve ever had.) In 2021, homes sales in the Lawrence metro totaled 1,546, according to WSU. The center predicts sales in 2025 will total 1,080. That’s the case in every Kansas metro market. Kansas City is expected to have about 36,000 sales, which is about 10,000 fewer than in 2021.

• Lawrence’s projection of 1,080 homes sales in 2025 is the smallest number of any metro in Kansas. That is not surprising, given that Lawrence is the smallest metro area in the state, by population. The Manhattan metro includes Manhattan and Junction City, plus areas around both communities. That pushes the Manhattan metro population above Lawrence’s, but not by much. Its population is about 10% larger than ours.

But the difference in home sales between the two metro areas is stark. In 2023, according to WSU data, the Manhattan metro had 1,619 home sales compared to Lawrence’s 1,036. That’s a difference of 56%. The gap is forecast to grow significantly in 2025. Manhattan is forecast to have 1,800 homes sales. Lawrence is forecast to have 1,080. That’s a difference of 66%.