HousingIQ Survey of Kentucky REALTORS® – October 2021

Kentucky Housing Market To Hold Steady
Low housing supply and demand from investors to keep prices stable

Although economic concerns are tempering homebuyer enthusiasm, anticipated increases in home purchases by corporate investors will help hold the housing market steady in Kentucky, according to the October 2021 edition of the HousingIQ Survey of Kentucky REALTORS®.

Increased interest from investors will help offset any drop in demand from individual buyers as 40 percent of the survey respondents reported that potential buyers are holding back due to concerns about the economy.

More than half, or 54 percent of the responding REALTORS® from across Kentucky, expect an increase in sales to investors in the next year.

“Although consumers might hold back because of concerns about the economy, and an uptick in mortgage rates would further dampen consumer demand, strong demand for rental properties from corporate investors will keep prices stable,” said Vidur Dhanda, author of the survey.

Despite increased demand from investors being a positive for the market, less than half, or 43 percent of the Kentucky REALTORS®, expect house prices to rise.

Dhanda noted that what happened recently with Zillow Offers, an online home-buying program that announced significant financial losses and company layoffs, “reinforces the need for institutional investors to be conservative in their pricing, and they are unlikely to fuel bidding wars.”

As regards housing supply, less than half, or 42 percent, of Kentucky REALTORS® anticipate an increase in the number of new listings over the next 12 months. In addition, only 48 percent of the respondents expect an increase in new construction. These responses indicate that housing supply woes will continue.

47 percent of respondents expect greater price-cutting by sellers further suggesting that home price growth will moderate.

Dhanda said, however, the continued shortage of homes will buffer house prices from any sharp decline.

The survey results also show that 60 percent of the respondents anticipate greater interest from out-of-state buyers, a noticeable trend for Kentucky.

“Kentucky continues to be an attractive destination,” said Kentucky REALTORS® CEO Steve Stevens. “Local REALTORS®, armed with connections and a network of service providers, can facilitate a smooth transaction.”

The survey results also revealed that 54 percent of the respondents reported that mom-and-pop landlords were choosing to sell their properties.

“Although a drop from last month’s survey results, the situation for mom-and-pop landlords is far from desirable,” said Paul Del Rio, communications director for Kentucky REALTORS®. “They are an important source of affordable housing, and we continue to advocate on their behalf.”

Survey Highlights

  • 43% expect house prices to increase
    • 47% expect greater price-cutting
    • 30% expect more houses to sell below the asking price
  • 60% expect houses to stay on the market longer
    • 48% anticipate an increase in the pace of new construction
    • 42% anticipate an increase in the pace of new listings

Based on the monthly survey data, the HousingIQ/Kentucky REALTORS® Confidence Index provides a composite measure of expectations for the Kentucky housing market over the next year.

The HousingIQ/Kentucky REALTORS® Confidence Index inched down less than one point to 39.0 from last month. A value of 100 corresponds to all respondents agreeing that market conditions will improve, while 50 corresponds to respondents anticipating no change in market conditions.

The Price Expectation and Buyer Power sub-indexes also edged down one point each, currently holding at 60 and 67, respectively. The Homeowner Stress sub-index increased by nearly two points to read 75.

Year-over-year, the headline index is down eight points, price expectations are down four points, and buyer power is up 20 points, reflecting overall deceleration in price growth and the red hot seller’s market turning buyer friendly.

In the latest issue of the Home Purchase Sentiment Index, which tabulates national consumer sentiment, Fannie Mae reported a two-point increase in the number of respondents who said it is a good time to buy a home to 30 percent. The number of respondents who said it is a good time to sell also increased three points to 77 percent.

A vast majority of Kentucky REALTORS®— 79 percent — said their recent buyers were happy with the price they paid for their homes, even as respondents report buyers holding back on account of economic concerns. This absence of buyer’s remorse as the market moderates demonstrates the value of accurate pricing.

“As Zillow discovered, pricing a house is an art and science. It requires local knowledge to evaluate the myriad of soft factors that influence price,” said Charles Hinckley, president of Kentucky REALTORS®. Hinckley advises working with a REALTOR® who has the training, knowledge, and expertise to price a house correctly.

The survey results are available here.

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