Comprehensive Housing Market Analysis for Kansas City, Missouri-Kansas

The analysis presented in this report was completed prior to the COVID-19 outbreak in the United States and therefore the forecast estimates do not take into account the economic and housing market impacts of the actions taken to limit contagion of the virus. At this time, the duration and depth of the economic disruption are unclear, as are the extent and effectiveness of countermeasures. HUD will continue to monitor market conditions in the HMA and provide an updated report/addendum in the future.

COMPREHENSIVE HOUSING MARKET ANALYSIS

Kansas City, Missouri-Kansas

U.S. Department of Housing and Urban Development, Office of Policy Development and Research

As of January 1, 2020

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Kansas City, Missouri-Kansas Comprehensive Housing Market Analysis as of January 1, 2020

Executive Summary2

Executive Summary

Housing Market Area Description

The Kansas City Housing Market Area (HMA), coterminous with the Kansas City, MO-KS Metropolitan Statistical Area (MSA), encompasses 14 counties along the border between Missouri and Kansas. For this analysis, the HMA is divided into two submarkets: (1) the Missouri submarket, which consists of Bates, Caldwell, Cass, Clay, Clinton, Jackson, Lafayette, Platte, and Ray Counties; and (2) the Kansas submarket, which consists of Johnson, Linn, Miami, Leavenworth, and Wyandotte Counties. The city of Kansas City is known for its style of jazz. In 2018, the United Nations Educational, Scientific, and Cultural Organization designated Kansas City as a "City of Music," the only such city in the United States.

Tools and Resources

Find interim updates for this metropolitan area, and select geographies nationally, at PD&R's Market-at-a-Glance tool. Additional data for the HMA can be found in this report's supplemental tables. For information on HUD-supported activity in this area, see the Community Assessment Reporting Tool.

Comprehensive Housing Market Analysis Kansas City, Missouri-Kansas

U.S. Department of Housing and Urban Development, Office of Policy Development and Research

Kansas City, Missouri-Kansas Comprehensive Housing Market Analysis as of January 1, 2020

Market Qualifiers

Economy

Increasing: During 2019, nonfarm payrolls increased by 15,100, or 1.4 percent, which was the ninth consecutive year of growth.

Since 2011, nonfarm payroll jobs have increased by an average of 16,200, or 1.6 percent, annually. The unemployment rate had dropped from a peak of 8.7 percent in 2009 and 2010 to 3.2 percent in 2019. During 2019, job gains occurred in 8 of the 11 employment sectors, with the education and health services sector having the largest increase, up by 7,000 jobs, or 4.5 percent. During the 3-year forecast period, nonfarm payrolls are expected to increase an average of 0.9 percent annually.

Sales Market

Slightly Tight: The average new and existing home sales price increased by 3 percent during 2019.

The home sales market in the Kansas City HMA is slightly tight, with an estimated vacancy rate of 1.3 percent, down from 2.7 percent in 2010. The number of home sales in the Kansas City HMA declined nearly 5 percent during 2019 from an all-time high in 2018, as a lack of inventory for sale constrained the market (Metrostudy, A Hanley Wood Company). During December 2019, there were 2.0 months of inventory on the market, down from 2.4 months in December 2018 (Kansas City Association of Realtors?). During the 3-year forecast period, demand is estimated for 17,875 new homes. The 1,480 homes under construction will satisfy a portion of the demand during the first year.

Executive Summary3

Rental Market

Balanced: The average rent for an apartment increased 3 percent during 2019, which is the lowest annual rent growth since 2013.

The overall rental market is currently balanced with an estimated 6.4-percent vacancy rate, down from 11.7 percent in 2010, when conditions were soft. Similar conditions exist in both submarkets where the overall vacancy rates have declined significantly since 2010. The apartment market in the HMA is slightly tight, with a vacancy rate of 4.5 percent during 2019, down from 4.9 percent in 2018 (Reis, Inc.). The apartment market improved significantly in the first half of the decade from soft conditions in 2010. By 2015, the apartment market conditions became tight. Increased rental production since then has helped to meet the increased demand and alleviate the tight conditions that existed in 2015. During the 3-year forecast period, demand is estimated for 13,425 new rental units. The 10,100 units under construction will satisfy a significant portion of the demand.

TABLE OF CONTENTS

Economic Conditions 4 Population and Households 10 Home Sales Market 14 Rental Market 23 Terminology Definitions and Notes 30

3-Year Housing Demand Forecast

Sales Units

Rental Units

Kansas City HMA Total

Missouri

Kansas

Kansas City HMA Total

Missouri

Kansas

Total Demand Under Construction

17,875 1,480

10,350 800

7,525 680

13,425 10,100

8,375 5,500

5,050 4,600

Notes: Total demand represents the estimated production necessary to achieve a balanced market at the end of the forecast period. Units under construction as of January 1, 2020. The forecast period is from the current date (January 1, 2020), to January 1, 2023. Source: Estimates by the analyst

Comprehensive Housing Market Analysis Kansas City, Missouri-Kansas

U.S. Department of Housing and Urban Development, Office of Policy Development and Research

Kansas City, Missouri-Kansas Comprehensive Housing Market Analysis as of January 1, 2020

Economic Conditions

Largest Sector: Professional and Business Services

Economic conditions remain strong as nonfarm payrolls have increased in the Kansas City HMA for 9 consecutive years.

Primary Local Economic Factors

The city of Kansas City originated as a river port on the Missouri River and later became a major rail hub. Today, the HMA, which is near the geographic center of the continental United States, continues to serve as a hub for shipping and distribution for a large area of the country. As a transportation hub, one of the most recent developments in the HMA is Logistics Park Kansas City, a 1,700acre planned development with a capacity of 17 million square feet of industrial space. The HMA is home to the Kansas City Southern railway, which ranks at 816 on the Fortune 1,000 list. The city of Kansas City also has a large federal government presence, which includes one of the five Internal Revenue Service (IRS) processing centers. With the IRS having a large presence in the city of Kansas City, the HMA is also home to H&R Block, Inc.

Current Conditions--Nonfarm Payrolls

During 2019, nonfarm payrolls totaled more than 1.1 million, an increase of 15,100 jobs, or 1.4 percent from 2018 when nonfarm payrolls increased by 11,800, or 1.1 percent (Table 1). Nonfarm payrolls expanded in 8 of the 11 employment sectors, with job growth being led by the education and health services sector, which increased by 7,000 jobs, or 4.5 percent, to 162,500 jobs. Contributing to job growth in this sector was the opening of several new microhospitals and expansions of existing hospitals throughout the HMA, including the $100 million expansion at The University of Kansas Hospital Indian Creek Campus and a $100 million expansion of the Olathe Medical Center in Olathe, Kansas. From 2001 to current, the education and health services sector has been the fastest growing sector in the HMA, increasing by an average of 3,300 jobs, or 2.6 percent, annually (Figure 1).

Economic Conditions4

Table 1. 12-Month Average Nonfarm Payroll Jobs (1,000s) in the Kansas City HMA, by Sector

12 Months Ending

December 2018

12 Months Ending

December 2019

Absolute Percentage

Change

Change

Total Nonfarm Payroll Jobs

1,096.5

1,111.6

15.1

1.4

Goods-Producing Sectors

126.5

128.7

2.2

1.7

Mining, Logging, & Construction

49.6

51.6

2.0

4.0

Manufacturing

76.9

77.2

0.3

0.4

Service-Providing Sectors

970.0

982.9

12.9

1.3

Wholesale & Retail Trade

162.7

160.8

-1.9

-1.2

Transportation & Utilities

53.9

53.9

0.0

0.0

Information

17.0

15.8

-1.2

-7.1

Financial Activities

80.0

78.3

-1.7

-2.1

Professional & Business Services

194.3

198.0

3.7

1.9

Education & Health Services

155.5

162.5

7.0

4.5

Leisure & Hospitality

110.0

111.1

1.1

1.0

Other Services

42.7

42.7

0.0

0.0

Government

154.0

159.7

5.7

3.7

Notes: Based on 12-month averages through December 2018 and December 2019. Numbers may not add to totals due to rounding. Data are in thousands. Source: U.S. Bureau of Labor Statistics

Figure 1. Sector Growth in the Kansas City HMA, 2001 to Current

Total Nonfarm Payroll Jobs Goods-Producing Sectors Mining, Logging, & Construction Manufacturing Service-Providing Sectors Wholesale & Retail Trade Transportation & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospitality Other Services Government

-80 -60 -40 -20 0 20 40 60 80

Change in Jobs (%)

Note: The current date is January 1, 2020. Source: U.S. Bureau of Labor Statistics

Comprehensive Housing Market Analysis Kansas City, Missouri-Kansas

U.S. Department of Housing and Urban Development, Office of Policy Development and Research

Kansas City, Missouri-Kansas Comprehensive Housing Market Analysis as of January 1, 2020

Economic Conditions5

The government sector added the second greatest number of jobs, increasing by 5,700, or 3.7 percent, during 2019. Job growth accelerated in this sector due to increased employment in the federal government subsector, which increased by 1,400 jobs, or 5 percent, during 2019. Increased hiring of temporary census workers and the relocation of U.S. Department of Agriculture (USDA) employees from Washington, D.C., to a downtown Kansas City, Missouri location contributed to growth. More than 500 jobs in the USDA Economic Research Service and National Institute of Food and Agriculture moved to the HMA. The local government subsector increased by 4,300, or 3.9 percent, during 2019, which was mostly the result of hiring new schoolteachers, especially in the Kansas submarket, where local government hiring remained flat from 2014 through 2017. The federal government is the largest employer in the HMA, with more than 20,800 employees at various agencies and an additional 7,500 at Fort Leavenworth. Table 2 shows the list of the 10 largest employers in the Kansas City HMA.

Table 2. Major Employers in the Kansas City HMA

Name of Employer

Nonfarm Payroll Sector

Number of Employees

Federal Government

Government

20,846

Cerner Corporation

Professional & Business Services

14,178

The University of Kansas Health System

Education & Health Services

10,229

HCA Midwest Health

Education & Health Services

9,963

Saint Luke's Health System

Education & Health Services

9,029

Fort Leavenworth

Government

8,937

Children's Mercy Hospital

Education & Health Services

8,614

Ford Motor Company

Manufacturing

6,640

Hallmark Cards, Inc.

Wholesale & Retail Trade

6,085

Sprint Corporation

Information

6,000

Notes: Excludes local school districts. Employment figures for Fort Leavenworth include federal government employees and private contractors who work on base and military personal, who are not counted in nonfarm payroll data. Source:

The largest employment sector in the Kansas City HMA is the professional and business services sector with 198,000 jobs, accounting for nearly 18 percent of all nonfarm payroll jobs (Figure 2). The sector was the third largest growth sector in 2019, gaining 3,700 jobs, or 1.9 percent. This sector has been the second fastest growing sector in the HMA from 2001 to current, increasing by an average of 3,200 jobs, or 2.0 percent, annually. Since 2011, job creation in this sector has increased by an average of 5,100 jobs, or 3.0 percent, annually, the fastest pace among all sectors since 2011. Contributing to the large increase of jobs in this sector are several expansions at Cerner Corporation-- a healthcare information technology company. Work is still ongoing at the Cerner Corporation Innovations Campus as construction is wrapping up on the third and fourth phases of this project. Since this project started in 2016, the company has added more than 4,000 full-time employees with continued growth expected over the next several years.

Figure 2. Share of Nonfarm Payroll Jobs in the Kansas City HMA, by Sector

Government 14%

Mining, Logging, & Construction 5% Manufacturing 7%

Other Services 4% Leisure & Hospitality 10%

Education & Health Services 15%

Total 1,111.6

Trade 14%

Transportation & Utilities 5% Information 1% Financial Activities 7%

Professional & Business Services 18%

Notes: Total nonfarm payroll is in thousands. Percentages may not add to 100 percent due to rounding. Based on 12-month averages through December 2019. Source: U.S. Bureau of Labor Statistics

Comprehensive Housing Market Analysis Kansas City, Missouri-Kansas

U.S. Department of Housing and Urban Development, Office of Policy Development and Research

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