Kelley Nisbet is the president of the local real estate association Bluegrass Realtors. She also serves as the managing broker and director of relocation with Coldwell Banker McMahan.
It has been a whirlwind few years for the residential real estate market, but now, according to Kelley Nisbet, the president of Bluegrass Realtors, things may finally be settling down thanks to some market stabilization.
Several factors — from higher interest rates to lower stock — are creating challenges for buyers, sellers, and investors, but overall, Nisbet said, the outlook is promising. And while the Lexington-Fayette Urban County Council recently passed short-term rental regulations, as well as the recent expansion of the urban service boundary, it’s too soon to tell what kind of an impact those policy moves will have on the real estate market in Central Kentucky.
In May, Bluegrass Realtors reported that home prices across Central Kentucky reached an all-time high. The median home prices surpassed $259,000, representing a 4% increase compared to the same period last year. This marked the 51st consecutive month of year-over-year price appreciation, as noted by the association.
However, the volume of sales dropped to $291 million, a 30% decline over last year’s total of $414 million. Experts attributed the drop to a lack of inventory, which is 7% less than last year, and 25% less than pre-pandemic levels in early 2020.
We spoke with Nisbet to get a feel for what area buyers, sellers, and investors face when it comes to the residential real estate market and how those in the market and those who are considering entering the market can best navigate the challenges ahead.
What are some of the challenges facing buyers right now?
One of the biggest challenges is the lack of inventory. You’ve got a lot more people looking and there are fewer homes available than before. When COVID hit, we saw a huge reduction in our inventory and thought we would see a reduction in people purchasing homes, but we didn’t. We had a lot of buyers out there buying and not a lot of sellers selling. We thought it was going to come back, but it hasn’t. And we’ve seen the median home price grow exponentially over the past four years.
What would you suggest to buyers as a way to navigate the current market?
The days of going into a situation and making an offer on a house and not having your “I”s dotted, and your “T”s crossed on your loan product are over. You can’t go into it thinking you can call a home inspector later. Buyers just really need to be very proactive and very on-point. This is a business situation you’ve got to be prepared for. You may be going up against another buyer that will have the professionals on their team ready, so you should too.
What are some of the challenges facing sellers right now?
Sellers need to be pricing correctly and listening to their real estate agent. Realtors can advise them on a house’s curb appeal and what they need to do to make the home more attractive to buyers, and their Realtors need to be preparing them for a situation with multiple offers. And sellers need to know where they are going to go once the house sells. Probably 80% of homeowners right now are sitting on an interest rate of 5% or lower. What’s facing them is putting their house on the market and knowing wherever they go to next, they are getting a loan that will be at a higher interest rate.
The other issue is appreciation. We had been seeing price appreciation in the 10 to 12% year-over-year range. That’s changed. We’re not seeing any price decline, but we are seeing price adjustments because people are coming into this thinking that property is still appreciating at the rate it has been. It’s now more like 3 to 6% year-over-year. So, we’re seeing a lot of price adjustments because sellers and agents developing pricing based on the historical data are pricing homes a little aggressively. We have to be very aware that the market’s changing every day and we’ll continue to see price increases, but they’re just not growing quite as fast.
How is the interest rate affecting the real estate market?
Interest rates affect everyone purchasing. Does it stop everyone? No, people are still going to buy and sell homes. The interest rate is not as low as people have gotten accustomed to, but it will affect buyers and sellers — and investors as well.
We used to see in our market investors purchasing multiple-unit housing and things like that, but the investor purchases have changed. Now we’re seeing investors also purchasing single-family homes. And investors have gotten much choosier about the properties they are acquiring and the prices they are willing to pay for them. With higher interest rates and less access to capital, people are having to be more selective.
How will expanding the urban service boundary impact the real estate market in Lexington?
We supported the last expansion vote that happened and we’re very excited that it will happen. But it won’t happen anytime soon. Over the next 18 months they will be building the framework and providing the mechanism for how it will look and where the land will be, but I don’t think its impact is something we can determine right now.
This is a market with an inventory level we cannot build ourselves out of. It will take a multi-faceted approach.