Experts say that far from the supercompetitive real estate market of the past two years, the market in Central Kentucky this year is thriving but less aggressive.
Real estate agents, and officials with the Lexington-Bluegrass Association of Realtors (LBAR), say the housing market remains tight but that rising interest rates and consumer uncertainty are causing changes in the residential market.
Rusty Underwood, the incoming president of LBAR, said the typical buyer experience in Central Kentucky is anything but ordinary.
“If you’d asked me [about the typical buyer experience] in 2019, I would have such a great answer for you, but there is no normal right now,” Underwood said. “If I had to give you my sentiments on how things feel right now, I’d say that we’re entering a niche that’s slightly less competitive for buyers.”
While the market remains competitive, he said, it’s much less competitive than it was during 2020 and 2021 when interest rates were low.
But to say the market has had a huge shift, Justin Landon, CEO of LBAR, said, would be an overstatement.
“In 2020 and 2021 … many people saw historically low interest rates and rising prices as a good time to move or invest in real estate,” Landon said.
“As we look into 2022, although rising interest rates have impacted some of the buyer pool and we’re still short of inventory, the market remains relatively strong, although not quite at 2020 and 2021 levels.”
Both men said a surplus of demand has kept housing prices high, even as demand wanes slightly.
Rick Queen, vice president of Turf Town Properties, said the market remains active.
“I haven’t seen or experienced any slowdown in buyer’s interest,” Queen said. “I think buyers tend to take a little more time now in making decisions than they maybe did two months ago.”
Queen said inventory levels remain high, with more than 300 active listings as of mid-July. In comparison, he said, three to four months ago, there were between 100 and 125 listings.
Queen said that, previously, the low inventory was a catalyst that sparked increased pricing, as well as the rising costs of new construction. With interest rates at 3 percent, buyers also had the flexibility to o.er more for houses or increase their budget. But higher prices seem to be subsiding thanks to rising interest rates.
“Right now, we’re in a place where interest rates are probably more in the 5.5 to 6 percent range on a 30-year fixed mortgage,” he said. “That factor comes into play with buyers looking for houses. It’s also a factor … in the price points that most buyers are looking at. When you have 3 percent loan versus a 6 percent loan rate, it certainly changes where you would want to be as far as a price point for your monthly payment or overall what you want to borrow.”
Queen said other factors, like corporations buying housing for rental income, seem to be subsiding.
“We have not had as many corporate purchases of single-family homes as other mid-sized to large cities have had,” he said. “We had a lot of corporate purchases of apartment buildings and a significant amount of investment from out-of-state investors purchasing apartments. But as far as smaller investors purchasing homes for Airbnbs, we have noticed that several have sold their Airbnb homes strictly because of the increase in value. And we’re seeing them being sold to folks who are turning them into single-family residences.”
Still, Underwood said, real estate is an asset that, in most cases, continues to increase in value.
“When I moved to Lexington in 2018, real estate price increases were 8 percent year-over- year. Coming from Texas, I thought that was unsustainably high, but ever since then it’s just gone up 12 percent, 14 percent and 15 percent year-over-year,” Underwood said. “Sellers listing their homes for sale expect those price increases. Growth is slowing down a tick … but overall pricing is still historically high.”
The future of the Central Kentucky real estate market, Landon said, looks to continue in the same direction, especially with limited supply and growing demand.
“Trying to look forward is always challenging, but I think, certainly in the next 12 to 24 months, supply will remain constrained,” Landon said. “In the next five years, I don’t see any more supply coming online. Millennials are entering the market at a rate that we’ve never seen before and Generation Z is coming in right behind. The reality is, we’re not building enough homes nationally, and we’re not building enough homes locally to keep up with demand. We have a lot of folks who want to enter home ownership, and we just don’t have enough homes to accommodate them.”