FOR IMMEDIATE RELEASE
Date 1/29/04

Contact: Matt Derrick
(816) 942-8800, ext. 213

Experts Forecast Strong Kansas City Housing Market in 2004

Low mortgage rates and an improving jobs picture point to another strong year for housing in Kansas City, according to a panel of housing and economic experts at Housing Forecast 2004, presented Thursday by the Home Builders Association of Greater Kansas City. More than 250 housing professionals attended the forecast event at the Overland Park Marriott Hotel.

Kansas City is coming off a record year in 2003 for single-family new home construction, and market forces appear in favor of helping Kansas City to another near-record year. A total of 10,742 single-family permits were issued in the metro last year, a 7 percent increase from 2002. During the last two years, housing has been credited with boosting both the local and national economy as new-home construction has hit record levels.

Dan Whitney, president of housing research firm Landmarketing, expects housing starts and permits to be on par with last year’s totals and projects new-home sales may actually increase. Higher than normal inventories heading into 2004 may allow local home builders to increase sales over last year, Whitney explained.

As for the where the hot spots are, Whitney said areas such as Clay County and Wyandotte County may be the biggest benefactors of changes in the local marketplace. Last year, Clay County saw the largest increase in new-home construction in the metro and Wyandotte County has passed both Leavenworth and Miami counties in new-home production in recent years in terms of market size. Johnson County, the local leader in new-home production, has seen its market share drop 25 percent over the last five years as new-home prices in the county rise and new housing choices emerge in other locations.

“ It is a function of land, it is a function of price, it is a function of what local municipalities are doing,” Whitney said. He pointed to long-popular new-home locations such as Overland Park and Leawood where fewer new-home sites in the development process are resulting in higher prices and lower housing production.

Both Whitney and Edsel Charles, president of housing research firm MarketGraphics, said 2004 will likely see home builders branching in new directions in order to better meet the demand for new homes and provide a better mix of housing choices.“

More builders will seek opportunities in new areas of the market,” Whitney said. Charles said demographic-specific products such as active adult and seniors housing and townhomes will thrive as baby boomers near retirement and shift their housing priorities toward downsizing.

On the local economic front, 2004 may bring mixed results for housing, according to Frank Lenk, director of research services for the Mid-America Regional Council. The good news is that Lenk projects the metro will add 20,000 new jobs during the coming year after losing approximately 40,000 jobs during the economic downturn.

“The economy seems to have exhausted its ability to grow without hiring more workers. We expect [to see hiring] pick up soon,” Lenk said. “In the coming year economic growth should outpace productivity growth and this will result in new jobs."

On the downside, all indications point to an increase in mortgage rates later this year. Low mortgage rates have been the catalyst for housing growth since the Federal Reserve began aggressively cutting interest rates in 2001.

“The Fed will raise rates,” Lenk said. “We know this. But the question is when.”
Charles said that any significant increases in mortgage rates will likely not occur until late in 2004, and may not have an immediate impact on housing demand.

“Will the market react to a 1 percent rise in interest rates? We don't know for sure. But we have a suspicion it won’t,” Charles said. “Rates in the foreseeable future will not be a problem.”

Charts from the 2004 Housing Forecast:
Permit History and Forecast Thru 2009
New Home Closings
Current New Activity
Market Share by County
New Home Starts

The Home Builders Association (HBA) of Greater Kansas City is the voice of the housing industry and the source for housing information. Comprising more than 1,000 member companies, the HBA represents an industry that contributes more than 2.5 billion dollars to the Kansas City economy and supports more than 36,000 jobs in the Greater Kansas City metropolitan area.

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