Analysts: Rising prices, fewer vacancies keep Lexington housing, rental markets competitive
Demand is still largely outpacing supply, experts say, even as markets cool nationwide.
LEXINGTON, Ky. (WKYT) - Buying a house is part of the American dream, but experts continue to say it can be a tougher dream to achieve right now in Lexington - especially for first-time home buyers who find themselves in a competitive market with rising prices.
“It is a little bit harder for a first-time home buyer right now,” said Susie Basham, a Realtor with The Agency, “because they’re competing against a lot of other first-time home buyers, as well as investors.”
With home prices ticking up, analysts say investor demand is strong, allowing them to charge higher rents or to sell for higher prices homes they have renovated.
Investors bought more than 18 percent of U.S. homes purchased in the fourth quarter of 2021, according to another real estate brokerage, Redfin. Their analysis found the share of investor purchases in 40 large U.S. metropolitan areas ranged from 6% in Providence, Rhode Island to 32.7% in Atlanta.
Using Redfin’s methodology - which defines an investor as any buyer whose name includes at least one of the following keywords: LLC, Inc, Trust, Corp, Homes - a WKYT Investigates analysis of two-and-a-half years of Fayette County home sale records posted online shows investor demand remains strong in Lexington.
The share of homes purchased by investors in the fourth quarter of 2021 was roughly 30%, which would rank Lexington near the top of the metros analyzed by Redfin. A similar share also carried over into the first quarter of 2022.
(Note: This is an approximate calculation, as this methodology does not account for individuals purchasing real estate as an LLC for financial, legal or personal protection or for other purposes such as parents helping their children buy their first home.)
Basham says the large investor demand here in Lexington stems from the city itself, its proximity to other large cities and the quality of life here.
“That makes the housing market a little more competitive, a little bit harder for somebody to get into their first-time house,” Basham said of the impact of this, “but if you have a strong credit rating, you’re working with a lender, you’re working with a Realtor, you can combat that.”
Sales here leveled off in April, according to the Lexington-Bluegrass Association of Realtors. Analysts believe that some buyers have moved back to the sidelines with home prices and interest rates on the rise. LBAR says the median home price rose to $245,000 - up 16% from last year.
But all these factors leave an impact not just on those looking to buy, but also on those who rent. Amid months of rent increases, experts say renting is still not getting any easier.
“What we’ve noticed here at Community Action Council is that housing has become less affordable, and harder and harder to find,” said Patrice Muhammad, communications manager with Community Action Council, “especially for those who are low-income and extremely low-income.”
Fewer vacancies and not enough supply makes their searches more difficult and take longer, Muhammad explained. She said they have also seen that landlords have the luxury right now of being more selective, perhaps raising rent or requiring more income to qualify.
Lexington had the country’s largest month-over-month rent increase in May, according to Apartment List rent estimates - a nearly 18% jump.
Community Action Council’s efforts right now are focused on housing stabilization - helping people stay in the current homes by paying past-due rent and a few months going forward. It is a mission that, given the current market, may be more important than ever.
“Because, as we know, if you have to leave your current residence, it’s not going to get any better,” Muhammad said. “You’re going to have to find another place, hopefully comparable space, comparable rent; it’s almost impossible to find.”
Advocates continue to say the city needs more housing and more affordable housing, especially as inflation drives up prices on nearly everything. (Rent costs make up about a third of the Consumer Price Index used to measure inflation.)
Realtors say new construction has not been able to keep up with demand, and, despite a 3% increase in the number of listed homes compared to the same time last year (according to LBAR’s report), there are not enough existing houses to keep things affordable, Basham said.
Interest rates are rising, but experts say they still expect demand to outpace supply in Lexington - especially on the affordable housing front.
Copyright 2022 WKYT. All rights reserved.