As with many markets in the national real estate landscape, Lexington’s real estate market is charging headlong into a new era – one driven not only by a new economy and its fresh and unique challenges, but also influenced by a generational shift in consumer preferences.
Over the past half century, home purchases have traditionally trended toward the suburbs, with home buyers abandoning the urban core in search of open spaces, larger yards, more square footage, shopping malls, super markets and fast food. Those preferences, however, are not necessarily embraced by today’s younger generations, whose inclinations are steadily starting to steer the overall market. Millennials – the oldest of whom will soon be 40 – comprise the largest segment of the home buying and renting markets, and data suggests they are much less inclined than their elders to seek shelter in the suburbs. Many would sacrifice square footage and a neighborhood Wal-Mart in exchange for proximity to a more dense and diverse community, public transit and social opportunities, such as those evidenced in the recent transformations of urban social destinations along Jefferson Street, National Avenue and North Limestone corridors here in Lexington.
As a result of this evolving demand for more urban lifestyles, the downtown-vicinity neighborhoods – several of which are featured in this issue – have some of the highest annual turnover rates (demonstrated by percentage of total homes sold), as well as year-over-year increases in median sale price in Fayette county.
Of course, for many, price continues to influence purchasing decisions more than lifestyle preferences, and while kitchen table economics often keep young families, especially those with children, in more economical and suburban developments, many homebuyers are discovering options that offer the benefits of both worlds. We are seeing a significant upward trend in the sale of houses in older more established neighborhoods inside New Circle Road – not downtown, but not the suburbs either.
Lexington’s top neighborhood over the past year, in terms of percentage of homes sold, was Gardenside; having similar characteristics, the featured neighborhoods surrounding the Southland Drive area also have high turnover rates and have experienced a significant bump in median sale price from last year.
Overall, we’ve been fortunate that, for a variety of reasons, Lexington’s economy did not decline so much as it merely stalled during recent recession years; when the economy turned in 2012, we didn’t have too deep a hole from which to climb. During this period some neighborhoods fared better than others – in terms of median sale price, Kenwick outperformed all others, increasing by nearly 40 percent since 2005. Much of Chevy Chase and the Tates Creek Road corridor within 40502 followed in very similar fashion; by contrast, the more suburban of our study areas, the Beaumont area, while remaining popular and within highly desirable school zones, is not experiencing the large increases in turnover rates and sales prices seen in the more urban affluent neighborhoods.
While the real estate market for existing homes has returned to pre-recession volumes, the number of newly constructed homes has steadily declined, with 2015 marking the fewest number of new houses being built in Fayette County and 2016 on track to match last year’s output. Although a lag between the start of an economic recovery and significant investment in new residential developments is to be expected, we are now five years in with no clear end in sight. One explanation often repeated by local developers and builders is that Fayette County lacks the inventory of developable land. Predictably, preservationists disagree, with the source for much of this disagreement apparently hingeing on the definition of “developable land.”
Are we truly facing a physical and literal lack of land inside the existing urban service area, or do regulatory barriers and too few willing sellers limit development opportunities? Ultimately the answer is most likely some combination of the two. At least three significant studies are currently underway in advance of the quintenniel update to the LFUCG Comprehensive Plan, which will hopefully shed light on these and other questions, but they will also certainly fuel debate on how Lexington manages future growth. As this debate unfolds, we face one indisputable certainty: Lexington’s population is growing at a significant clip. The U.S. Census Bureau projects by 2030, our population will increase by from 310,000 to 375,000. That’s 65,000 new residents who will need upwards of 30,000 additional housing units – contrast that with the roughly 10,000 units we’ve added over the previous decade.
Obviously, new single-family housing units must eventually come online. However, in the short term, economics 101 tells us where supply is diminishing and demand is increasing, prices are certain to climb – short of an unforeseen change in the overall economy, we are likely to remain in a seller’s market for the time being.
Click here to read our accompanying article "Best Places to Live: 5 Great Lexington Neighborhoods."