Intense bidding wars, cash offers, sight-unseen purchases, homes on the market for less than 48 hours — that’s the reality right now for homebuyers in the Topeka area.
National news in recent weeks has highlighted rising home prices, strong demand for real estate and a low inventory of houses for sale, and local markets aren’t immune.
In Shawnee County last month, homes sat on the market for a median of two days — down from a median of about eight days in April 2020. Such numbers are being fueled by a local shortage of homes for sale, and real estate professionals don’t see the light at the end of the tunnel.
“There’s a lot of demand. There’s just not a lot of inventory,” said Linda Briden, CEO of the Sunflower Association of Realtors.
‘Seller’s market’ fuels home appreciation
That lack of inventory is indicative of a housing market that favors the seller, which has been the case for almost 10 years, Briden said.
“We have 0.5-months supply of inventory on the market,” she said. “A balanced market would be six months, not half a month. A balanced market doesn’t give an advantage to the buyer or the seller. … We have not seen that in a long time.”
The current seller’s market is prompting high home appreciation in the area, leaving buyers paying more than expected or facing stiff competition from other buyers with their sights on the same properties.
“Obviously, with housing values going up, they’re paying more than they would have three or four years ago,” Briden said, “which is challenging now for first-time buyers if you’ve been saving all this time and all of a sudden what would’ve been in your price range five years ago might not be now.”
Briden said some homes in Topeka and Shawnee County are selling for more than 100% of their list price. But she noted list price isn’t the only thing to consider, as anticipated monthly mortgage payments are also important to look at.
“This month, the average sold price was 101.2% of the list price,” Briden said. “That, again, reflects the bidding wars, the multiple offers, paying pretty much more than you normally would because you have to move or really want that particular property.”
What Briden is hearing from Sunflower Association of Realtor members is that “it’s pretty crazy right now.” But the pendulum always comes back, she added.
“It swings both ways, so I’m hoping we’ll see a little bit of a correction,” she said. “But I’m not sure how soon that might be.”
Buyers likely to overpay
Those current buyer tactics — from bidding wars to sight-unseen purchases — are ones Realtor Doug Bassett, an agent with Topeka-based Berkshire Hathaway HomeServices First, is keenly familiar with.
He noted it is difficult to advise clients right now because they may be overpaying for property, “but you still want to buy a house and that’s your goal.”
“We had an offer the other day that was over asking (price) by 10%,” he said, “but the buyer was willing to pay an extra $10,000 if the property didn’t appraise, regardless of what it appraised at. What that meant was if I offered $250,000 and the appraisal came in at $249,900, I’d give you another 10 grand just to get the house.”
He said buyers looking for homes in Topeka and Shawnee County include first-time homebuyers, professionals moving to the area and families looking to upgrade.
But for those looking to sell and relocate, Bassett said, the transaction may be tricky.
“People can sell their house,” he said, “for more than maybe they could sell it for two years ago.”
But low inventory means selling may still come at a cost.
“That’s a big risk,” Bassett said, “because although you can get more money, where are you going to go?”
He suggested sellers have a backup plan if they haven’t already secured a new home to move into by the time they sell their current one.
“If you can’t buy a house that you find, that you love, are you going to rent? Are you going to live with friends?” he said. “That is a big problem right now, and that’s not just local. That’s all over the country.”
What’s causing the inventory shortage?
Pulling on data from the Wichita State University Center for Real Estate, Briden pointed to a broader trend that indicates the number of houses for sale in the Topeka area has been declining for several years.
In the Topeka area, Briden said, active listings over the past seven years have gone from more than a thousand in April 2014 to less than 200 in April 2021:
- 1,068 active listings in Topeka in April 2014.
- 956 in April 2015.
- 824 in April 2016.
- 650 in April 2017.
- 528 in April 2018.
- 493 in April 2019.
- 361 in April 2020.
- And 167 in April 2021.
Though homeowners who would like to sell but are unable to line up a future option may be contributing to the housing shortage by choosing not to list their properties, there are other explanations for the current lack of supply.
Briden said a decline in the number of new homes being built may be contributing to the problem.
But Katy Nelson, executive director of the Topeka Area Building Association, said new home construction has remained steady over the past few years.
“What we see as being the issue,” she said, “is that houses are being sold before they’re built.”
Most builders are working with clients to build custom homes, she added, and the majority “do not just go in and throw up 10 to 15 houses.”
Nelson said local builders are busy, with many already booked through the middle of next year. And the best home remodelers, she added, are in a similar boat.
“We honestly have some of the best talent in the country right here in town, and they’re booking out,” she said. “I’m getting three or four calls a day, and these calls are, you know: ‘Who do you recommend? Everybody’s busy.’
“If you find somebody who’s going to build your house tomorrow, I’d probably look for somebody else because there’s a reason they’re not busy.”
With the building business “booming,” Nelson said, it won’t be possible to address the local housing shortage without increasing the number of local builders first.
“There’s another issue. It all starts with there’s not enough houses,” she said, “but if you really dig into the problem, the problem is we don’t have enough people in our trade.”
Working to improve the housing supply
Unless the shortage of builders is addressed, Nelson indicated taking local homes and remodeling them may be the way to go.
“Topeka is and probably always will be a remodeling community,” she said. “There’s a lot of people that would rather go and buy a house for $125,000, even though their budget is $200,000, and go in and gut the house and have somebody remodel it.”
Local agency Hill & Home Partners is attempting to improve the local housing inventory by taking that approach, as it scoops up homes that might not otherwise be market ready and renovates them with potential buyers in mind.
Hill & Home, which is owned by Josiah and Andrea Engstrom, began operating in January. The couple founded the firm after selling their businesses, Bajillion Agency and MotoVike Films, late last year.
Hill & Home works by buying properties around town that need attention and flipping them so that they are move-in ready.
Engstrom said they expect to close on their ninth house on Monday. Of the eight houses they have already bought, three have been sold, and they are in the process of remodeling the rest.
Whether you are looking to build or remodel, building costs right now, especially for lumber, may be steep.
“You used to be able to buy a sheet of plywood for $8-10,” Nelson said. “Now, you’re looking at $55-65.”
Engstrom has encountered the high construction costs, but since homes are also selling for more, she said, it hasn’t hindered Hill & Home’s progress.
According to Engstrom, it hasn’t been difficult for Hill & Home to acquire houses because they don’t take traditional financing routes. They pay cash if necessary and buy homes in whatever condition they find them.
“We’re a great option for people who have some kind of challenge selling their house,” she said. “And sometimes it’s just, candidly, that their house needs a lot of work, and they don’t want to go through the process of repairing it themselves or it’s cost prohibitive for them to do so.
“A lot of the housing market in Topeka is really affordable,” she added, “but a lot of people need normal, traditional financing. And unless your house is in great shape, it’s hard to get traditional financing on a home. So we’re able to help people when it’s not a good fit for them to sell (through the market).”
Engstrom indicated she and her husband are aware of the local housing shortage, and while addressing that problem isn’t the only reason they’re flipping homes, it is a big part of it.
“Over the last few years, especially, we’ve heard so much about the need for housing,” Engstrom said. “It’s a major part of being able to attract young talent and retain young talent.”
In addition to buying up occupied homes and flipping them, Hill & Home hopes to rehab some vacant properties in the area.
“(We) also heard there’s about 2,000 vacant homes just sitting here,” she said, “so part of our mission is to take vacant homes and turn them into viable, affordable homes for young families and individuals.”
Engstrom sees the work Hill & Home does as a feasible way to increase the local housing supply. But, she said, it isn’t likely one business can do it alone.
“We don’t see other people doing fixer-uppers as competition. I think it just creates more momentum for this idea, and I know there are enough homes in our community that need this TLC,” she said.
“If you just imagine — we’ve done almost 10 houses already this year, and if there were 10 other people doing 10 houses a year, that makes a massive impact on dilapidated homes that really need some work in our community. That could make a huge impact on the curb appeal of some of our neighborhoods.”