Market conditions challenge housing affordability, but relief may be coming

Nov 28, 2022
| Posted in
woman searching for apartment rentals online

If you’ve been feeling the strain in the Kansas City housing market over the last two years, you’re not alone. Rents have increased by 20% since 2019, while median household income grew only 12% over a similar period.1 Rents outstripping incomes is an indication that the area’s supply of housing is not keeping up with demand.

Apartment vacancy rates

As competition for rental units heats up, the number of available units shrinks, resulting in declining vacancy rates. This has been the case in the Kansas City market for the better part of two years. In the multi-family market, apartment vacancy rates declined from a high of near 9% in late 2020 to 5.9% in the third quarter of 2022.

Rent increases

In the face of constant or rising demand for rental units, this diminished availability puts upward pressure on prices. As a result, rent increases accelerated from a little over 1% in the fourth quarter of 2020 to near 9% in the second quarter of 2022, as measured on a year-over-year basis.2

However, rent acceleration appears to have peaked. In third quarter of 2022, rent increases decelerated to about 7%. With only one data point, though, It is currently unclear how long this downward trend will continue and at what pace.

In the single-family market, the most recent data from Kansas City Association of Realtors shows the inventory of new homes on the market can support nearly 6 months of sales. A year ago, the supply could only support 3 months. At the same time, the pace of median home prices increase has also been cut in half, from an average annual increase of nearly 15% in March 2022 to 7% in October 2022.  

This data indicates that some relief may finally be in sight in the rental and single-family markets. However, the state of the market remains much more competitive than pre-pandemic norms and these recent trends will need to continue for some time to bring housing costs more in line with household income growth.

1 The most recent 3-year period for income data is 2018–2021.
2 Year-over-year means calculating change from one year to the next using the same time period. In this instance we are calculating change from the same quarter the year before.