The forecast for the 2013 Kentucky housing market paints the picture of a diverse landscape in terms the overall home sales throughout the state. Most significantly, this forecast draws attention to the more positive aspects of the Louisville market. The 2008 recession didn’t hit the Louisville area as hard as the rest of the state. However, the real estate market in the area did need to make some adjustments to better meet these predictions. 2013 was largely a year of upswing for the housing market in Kentucky, continuing the trend of the previous years. The positive trend continued into 2014 despite minor fluctuations in home prices in the third quarter of the year. Despite everything, this is not the most relevant aspect of the state market. Perhaps the most striking aspect remains the dramatic price increases the 2014 Kentucky housing market experienced over the past few years along with the large price discrepancies.
We believe that several factors will affect the evolution of the 2014 Kentucky housing market. Many of these factors continue in the state government policies. Other factors relate to the nationwide economic conditions. Others relate directly to the unique character of a market dominated by both urban and rural areas. Here are some of the main factors involved in our forecasts:
- The Kentucky labor market still hasn’t completely recovered from the recession
2014 marks five years from the official end of the financial crisis. However, the job market in Kentucky still suffers in its aftermath. The Kentucky Center for Economic Policy recently published a report titled The State of Working Kentucky 2014. This report explains that a very real job gap issue still exists in the state which requires solutions. On the one hand, Kentucky workers still face discrimination based on their education level, gender, race, and age. On the other hand, the declining trend in real wages causes a significant, ongoing decline of living standards for many citizens of Kentucky. According to the report, one in five part-time workers in Kentucky say they would rather hold a full time job. The same source states that median wages in Kentucky dropped by 8 percent (adjusted for inflation) from 2001 to 2013. All these factors culminated into forcing citizens to migrate out of the state, lowering housing affordability, and driving down the number of home sales.
- Kentucky’s economic outlook for 2014 remains reserved
Projections for Kentucky’s economic growth closely match the forecasts for U.S. averages for 2014. Experts expect the GDP will grow by 2 percent while the unemployment rate should hover around the 6.5 percent. Industry experts predict job growth to increase by 1.5 percent while U.S. employment growth should sit at 2 percent. We wish to note that Kentucky has done quite well for itself, rising above the trials of the recession with just a few snags in Lexington area. By and large, both the state economy and its housing market should enjoy a relatively balanced year in 2014 and beyond.
- Kentucky supports the Affordable Housing trust
Kentucky authorities deeply care about housing affordability which is why they have a long record of voting in favor for increased funding to the Affordable Housing Trust. Authorities make constant efforts to recover outstanding recording fees from various financial companies and company groups.
- The state of Kentucky cares about consumer rights
The Kentucky government historically encouraged trade organizations to support consumer rights. This support also extends to the state’s real estate industry. The real estate commission in Kentucky offers consumers an entire webpage providing consumer information resources. The Northern Kentucky Association of Realtors shows off its online presence with a financing guide for potential home buyers.
The diverse real estate in the 2014 Kentucky housing market makes it one of the more interesting states to watch out for this year and next. On one hand, nearly one third (or 30 percent) of all property listings in the state are situated in Louisville and Lexington. Another third (or 35 percent) remains undeveloped farmland. The overall picture of Kentucky’s housing market in 2014 looks like this:
- We expect sales numbers to continue to increase continuing the trend that become the norm in late 2011. Since then, condo listings increased by 50 percent. Single family housing units increased by a massive 70 percent. This year, the number of sales to continue increasing but at a more moderate (and sustainable) pace. In some ways, the market may have reached its limits for the time being. Prices still remain affordable (median prices sit at around $200,000 for an single family home and $175,000 for an apartment according to RealEstate.com), and the market remains favorable in the sellers favor. Slowdown in economic growth will likely affect the housing market as well.
- We can best describe increases in median housing prices as subtle. As of the writing of this report (November 2014), prices increased by .2 percent over the past twelve months. We expect that these prices will likely increase by 1.2 percent for the entire year. Real estate website Zillow.com pegs the median value of a Kentucky home at $125,900, with a mere 7 percent difference between the listing price and the selling price of a home. As of the end of October, the market may be considered healthy. On average, property typically sits just 88 days in listings before the sales are finalized. Only 13 percent of the homes for sale in Kentucky have a negative equity. Just .8 of Kentucky homes out of the 10,000 have foreclosed (compared to the 4.5 per 10,000 throughout the U.S.).
- Several areas in the 2014 Kentucky housing market experienced a massive upswing in terms of its pricing. Current prices exceed those recorded in 2007/2008 during the peak of the housing crisis. One such market is Kentucky’s Jefferson County. Jefferson’s March 2014 housing prices exceeded the 2007/2008 levels by 63 percent. Jefferson County experienced a negative drop of 33 percent of its foreclosures and currently holds an unemployment rate of 8.1 percent. It is the one housing market with the biggest price increase on record from 2007 onward in a chart of 8 similar markets from around the country. USA Today compiled this chart. As the economists explain, most of these markets (including the 2014 Kentucky housing market) are located in middle America. These markets remained relatively untouched by the recession and its devastating effects. These markets continued to steadily grow, completely undeterred by the recession, and are now peaking while majority of the country continues to recover from the effects of the crisis.