Real Estate Values



When you talk about comparative real estate values across America, the tendency is to laser in on one key number: Median sales price. There’s a good reason for that. Because housing costs consume such a large portion of a family’s take-home income, sales prices provide a useful barometer of the compensation needed to cost-justify moving into a new community.

And yet, another figure often overlooked might command a place in the calculus—the median ages of the homes available to purchase. There’s no question that stately old homes dating to the 1700s have a certain cachet and price premium if they’ve been well-maintained. But there’s no getting around the fact that age implies additional maintenance costs—potentially enough to skew the figures on the affordability of any given home.

That is one more reason why the Kansas City region has a competitive edge over many other cities nationwide. According to Realtor.com, the median age of a home listed in the spring of 2013 in Kansas City was 56 years. That puts this region in the upper-third of nearly 150 markets surveyed, and reflects the breadth of new home construction here over the past decade.

By comparison, staid major markets like New York and Philadelphia, or trendier ones like Sarasota, Fla., and Myrtle Beach, S.C., all fall into the bottom third. The median age in Myrtle Beach, in fact, is more than twice the Kansas City figure, at 117 years. That’s a lot of knob-and-tube wiring to replace.

Even a boomtown like Las Vegas, which led the nation in population growth for more than a decade before the housing crash of 2007–08, showed an inventory with a median age of 86 years, the realty Web site reports.

Pricing Factors

As the nation begins to finally shake off the realty slump, some markets are bouncing back faster than others. Newton’s law of motion—every action having an equal and opposite reaction—turns up within that recovery dynamic; markets that fell the hardest, like Vegas, the coastal regions and across the Sun Belt—are seeing prices storm back.

Kansas City, though, didn’t fall as far as a region, so its prices don’t need to come roaring back. The same factors that contribute to the stability of the overall economy here have served to moderate the swings on the housing and commercial property markets here, as well. The Realty.com figures, in fact, put Kansas City near the middle of those 150 markets, with a median listing price of $139,950.

That figure compares favorably with other regional areas like St. Louis ($162,900), Chicago ($189,000), Dallas ($219,000) and Denver ($282,000), and even comes in behind smaller markets like Omaha ($156,900), Oklahoma City ($158,950) and Des Moines ($169,900).

Entering the traditional home-buying season for 2011, another trade publication, Realty Times, said home prices in the Kansas City region were rising moderately, but that, overall, this remained a buyer’s market. Just two years later, a steady rise in demand has shifted the fulcrum of that market and by early 2013, we had achieved technical balance. The trend has continued since then, and while it’s still generally balanced, it’s now a balance that slightly favors sellers for the first time in years.

That delicate balance will shift as economic recovery unfolds, but even in a thriving economy, the Kansas City area has a distinct advantage over many other regions of the country in terms of residential, commercial and industrial property valuations. And those values are significant parts of the calculus any business must perform when analyzing its own costs for labor and land.

New York has density. Kansas City has space. While the direction for development in Manhattan can go only one direct—up—the Kansas City region has been expanding since the end of World War II. A century ago, development of The Country Club Plaza was considered a “suburban” phenomenon, occurring as it did along 47th Street. Today, the Plaza is considered one end of a commercial corridor that starts five miles to the north, in Downtown Kansas City.

Meanwhile, to the south, the residential push has extended to 135th Street and well beyond. And that’s where the laws of supply and demand have asserted themselves: That availability of so much land has long held prices in check.

In recent years, much of the development on the suburban/exurban fringe has focused on upscale residential units. And metropolitan Kansas City, with more highway lane-miles per capita than any other city in America, has been able to support this boom in small residential acreages of three to 10 acres. This development includes small, large-lot subdivisions and individual properties, including frequent examples of “luxury ranches” and other upscale, rural retreats. This trend is especially significant in some areas such as southern Jackson, Cass and Buchanan counties in Missouri, and Douglas County, Kan.

The availability of land—lots of it—serves as a governor on prices relative to comparable cities where geography prohibits expansion in any direction but up.

Commercial Revival

The rise in housing demand here has dovetailed with a similarly encouraging rebound in some segments of the commercial real estate market. As the economy faded five years ago, a number of retail developments foundered, but are now back on track with fresh faces on the development side and new infusions of cash.

And the region continues to flex newfound muscle in the areas of light industrial, transportation and distribution. In 2012, the area saw an 800,000-square-foot spec building open, the first of its kind since the downturn took hold.

That was a cue for other commercial real estate developers to announce plans for more, meaning millions of additional square feet of warehouse and distribution space are about to come on-line over the next few years.

For years, negotiating terms were clearly framed in favor of people seeking to rent or buy properties. Now, the dynamic is approaching a more historical balance, real estate professionals say. That means long-term lease prices are likely to start trending upward for the most desirable locations and buildings. It also means that renters seeking added benefits are losing some of the leverage to get the perks they’ve grown accustomed to in recent years.

Other looming changes in commercial realty will involve properties that have lost some of their appeal as retail sites because of changes in consumer buying patterns. Realty professionals say many of those buildings may be repurposed for entirely new uses, if not taken down altogether.