Topeka has many who want to buy homes but too few houses on the market to choose from
Shanna Sloyer
6 min read
The housing market in Topeka closely mirrored national real estate trends during the first half of 2023, with both plagued by low inventory, high home prices and rising interest rates.
Will these issues persist into the second half of the year, and what can potential sellers and buyers in the capital city expect through the end of 2023?
Following is what the experts told The Capital-Journal.
Existing home prices remain high in a tight Topeka market
Inventory of available homes in Topeka remains extremely low, said Sunflower Association of Realtors CEO Linda Briden. In a balanced real estate market, there is typically enough inventory to last five to seven months, creating a level playing field for buyers and sellers.
Briden said Topeka remains a strong seller’s market.
The housing market in Topeka closely mirrored national real estate trends during the first half of 2023. Both were plagued by low inventory, high home prices, and rising interest rates.
“The June 2023 residential housing report for Shawnee County indicated a 0.8-month supply of available homes on the market. This is indicative of all properties, prices, and locations,” said Briden. “The last time Shawnee County had inventory of at least four months or higher was July of 2015.”
She said she doesn’t see the market balancing itself out until buyer demand is satisfied. Nationally, housing inventory is also at historical lows, down 13.6% since last year at the same time. The shortage of available homes has caused existing home prices and valuations to skyrocket.
“I would not expect to see home prices recede due to extremely tight inventories that will continue to put upward pressure on home prices,” said Briden. “The recent price explosion is a reflection of supply problems that have been building for years.”
The National Association of Realtors forecasts interest on a 30-year fixed-rate mortgage will reach 6.4% by the end of the year, lowering only slightly to 6% in 2024. As part of an ongoing effort to curb inflation across the country, the Federal Reserve also raised its benchmark rate by a quarter of a point last week.
While the increase doesn’t directly impact mortgage rates, Briden said it does influence them, along with affecting adjustable-rate mortgages and home equity lines of credit.
“The 2% to 4% interest rates were great for buyers and most likely allowed them to purchase more home than they may have originally planned on," she said. "But low interest rates didn’t change the inventory issue and in turn, we saw sellers receiving multiple offers over asking price and sometimes with no buyer inspections.”
Housing affordability is especially problematic for first-time homeowners who don’t already have equity built up. Paired with a lack of houses priced for entry-level buyers, many younger families are delaying a home purchase because they can’t afford it.
According to Forbes, the median price for existing home sales reached $410,200 in June this year, which is the second highest price ever recorded, only following the all-time median high of $413,800 in June 2022.
Many are choosing to build amid housing shortage
Developers have been cautious since the housing crash of 2008, a problem that has contributed to the inventory issues plaguing the country today. Meanwhile, homeowners who bought before interest rates rose are staying put, making the shortage worse.
Topeka Area Building Association CEO Katy Nelson said she’s seeing higher demand for new construction in Shawnee County and the surrounding areas.
“Topeka is staying steady in the building permits issued and will continue to do so,” said Nelson. “The people that are serious about building are moving forward with the process.”
The gap between the median price of existing homes and new builds has narrowed in recent months. According to the U.S. Census Bureau and U.S. Department of Housing & Urban Development, the median price for a new house is $415,400, only about $5,000 more than the median price to buy an existing home.
The National Association of Home Builders/Wells Fargo Housing Market Index, which tracks how optimistic builders are feeling, was up to 56 last month from 55 in June. Any value larger than 50 indicates that builders foresee good conditions ahead for new construction projects.
New home construction faces challenges
Would-be homebuilders still face some challenges, including financing difficulties.
“When COVID hit, we lost a lot of smaller companies and the sub-producers that came with that, or they raised their prices a lot,” said Nelson. “Clients are needing to get requalified through their banks more often than before, and this seems to be a challenge for some people that are on the edge of moving forward or holding off.”
A lack of available lots in Topeka and Shawnee County has also deterred some people, who wouldn’t hesitate otherwise.
“In Topeka city limits, lots are limited. There is more availability in the county for the desirable lots,” said Nelson. “There are many people that feel this plays a big part in all building decisions.”
High material costs, including the price of lumber, have also contributed significantly to the increase in building expenses, something Nelson said she doesn’t see changing in the future.
“This is just like everything else," she said. Some prices have gone up and some have started to come back down. If you know what you are looking for, then now is a great time for you to build.
"Let’s face it, things are only going to get more expensive.”
Future real estate decisions favor the prepared
Sunflower Association CEO Briden said despite higher interest rates, buyer demand in the Topeka market is strong.
“I would expect to see continued buyer demand and perhaps sellers making some concessions where they wouldn’t have a year ago,” she said. “The best buyer candidate is someone that has done their due diligence. Buyers should always get pre-approved for a home loan by selecting a bank or mortgage company that fits their needs.”
Buyers are better able to stay within their budget and keep the home shopping process realistic when they know the amount of the loan for which they qualify, she said.
“Serious buyers should be prepared with a letter of pre-approval or proof of funds from their chosen bank or mortgage lender. (The lender) will do a thorough credit check to determine the amount of loan you qualify for,” said Briden. “Buyers then have a clear picture of what they can afford and don’t look in a price range that they will not qualify for.”
She encourages serious buyers and sellers to work with a Realtor, who would have access to the latest housing market data and trends would know the prices the market will bear. They also have valuable information about creative loan programs that may help first-time buyers, she said, and work to ensure their clients are well-represented in all transactions.
“Look for a Realtor member that you feel comfortable with,” said Briden. “I always suggest talking with friends or family that have used a local agent to see if they were happy with their experience and if they would recommend them. Then interview your top three or four before making your decision.
"It’s rather like dating. You’re going to be spending a lot of time with them, and it should be a comfortable experience.”
