Real Estate Values


Nine years.

That’s how long it took aggregate housing prices in the Kansas City market to climb back up after falling off a steep cliff with the nation’s real-estate crisis that began in 2007. From the second quarter of that year, prices took a five-year dive that didn’t turn back up until the third quarter of 2012.

Since then, however, “Happy Days Are Here Again” has been blaring for property owners, especially for homeowners.

According to the Federal Reserve Bank of St. Louis, the All-Transactions House Price Index,
which stood at 178.94 in Q2 of 2007 (100 being the baseline for Q1 1995), needed nearly a full decade to eclipse that level, hitting a record 183.64 in the second quarter of 2016.

That trend has continued virtually without interruption, as the most recent index reading hit 202.11 for the final quarter of 2017. Translated: A home selling for $100,000 in 1995 would be going for roughly $202,110 today.

While that trend has made it more challenging for some who are in the market to buy, particularly those looking for starter homes, in the broader scheme of things, Kansas City’s real-estate picture is even rosier than a decade ago, when compared to prices nationwide.

Other markets that felt the biggest residential-property declines in the crash of ’08—Florida, the Southwest and California, in particular—have roared back so intensely that buying a home there is more formidable for first-timers than it has ever been.
Advantage: Kansas City.

On the business side, there’s plenty of evidence that the market has relented from the squeeze it was placing on owners just a few years ago. Figures compiled by commercial realty firms show that average rents in this region are up for all property classes, while vacancy rates are down, with Downtown Kansas City showing promise in filling up empty office space, a trend largely driven by residential conversions in a market sorely lacking those.

And while the region continues to flex new muscle in the world of transportation, warehousing and logistics, millions of square feet added into that sector haven’t been able to stave off price increases.

Newmark Grubb Zimmer’s Q1 Industrial Market Report for 2018, for example, showed a remarkable increase of 13 million square feet of industrial space from the previous year’s Q1. Despite that surge, rents have actually increased, from $4.78 per square foot to $4.89.

The retail side’s vigor showed up in CBRE’s market report for the first quarter of 2018, perhaps most prominently with a decline of 160 basis points year-over-year. Across the metro area, average asking rates on retail leases hit $13.20 per square foot, up 35 cents from the previous year, and providing evidence that on-line shopping hasn’t completely wrecked the retail model.

Backing that up: 2.8 million square feet of positive net absorption in retail spaces since the start of 2015, with an additional 101,400 square feet com-ing on-line in the opening quarter of 2018.

The region’s office scene saw vacancy rates tighten up, contributing to a slight increase in overall rental rates. Downtown, the dynamic was aided in part by office-to-residential tower conversions.

While various metrics speak well of this market’s commercial realty health, the absolute No. 1 factor in the low cost of living for this region continues to be its housing prices, relative to those around the nation.

As housing accounts for a larger share of consumer spending than any other category, substantial savings there create options for spending in other areas, as well as on entertainment and recreation.

That becomes a powerful inducement for recruiters looking to hire talent this region, just as the sticker shock elsewhere reinforces Kansas City’s particular appeal when people explore career opportunities in coastal cities.