The demand for housing in Lexington and Fayette County has increased dramatically in the past year. Photo furnished
When Laura Minter and her husband, Kenn, began looking for a new home last year, they weren’t expecting to be searching for nearly 18 months.
“Every house we considered buying was quickly snapped up by someone offering cash, or $20,000 to $30,000 over asking price,” Laura Minter said. “We looked into building, but the price increases in lumber made it prohibitively expensive to build. We finally realized we weren’t going to be able to afford what we wanted in Fayette County.”
In the end, the Minters listened to the advice of their agent, Julie Baker, and purchased a home in Woodford County.
It’s a familiar story to those in the housing industry. Melia Hord, Lexington real estate agent and team lead/CEO of the Melia Realty Group, confirmed that the real estate market did not slow down in the way many industries did during a year largely defined by a pandemic.
“Regardless of a pandemic, the reality is people still had to buy and people had to sell, due to jobs, a life situation or a personal choice,” Hord said. “Builders were still building. On the flip side, people who didn’t ‘need’ to sell got cautious. Our housing inventory has dropped from a healthy six months of inventory to about one month of inventory. If people don’t sell, people can’t buy.”
Melia Hord
Hord said that in the past six months, her group has seen the number of offers on a single home escalate dramatically.
“It started with one to three offers, and today we are seeing anywhere from one to 30 offers on a home and most well over list price,” she said.
Greg Padgett
Greg Padgett, a partner in the construction company Padgett Construction, reinforced Hord’s sentiments.
Becky Reinhold
“The custom home market and the remodeling market were booming before the pandemic, and demand increased during the pandemic,” said Padgett, whose company focuses on large custom projects, including new construction and remodeling. “It’s never slowed down.”
“[The market is] definitely the busiest we’ve ever seen,” said Becky Reinhold, principal broker and vice-president of Bluegrass Sotheby’s International Realty. “With historically low mortgage rates, increased buyer demand and higher than ever prices, it presents both challenges and opportunities. Lack of inventory and super-low interest rates are fueling the feeding frenzy.”
Rick Queen
Realtor Rick Queen, vice-president and partner at Turf Town Properties, explained: “We’re seeing a tremendous impact with out-of-town and out-of-state-buyers coming into the market. We’re also seeing people doing the ‘move up’ – selling a home in the $200,000 range and moving into a home in the $400,000 to $500,000 range.”
Though there are a number of factors at play, when talking about the competitive nature of today’s housing market, the conversation keeps coming back to inventory.
“We are experiencing some lack of developable land, and we’re also getting to the point where Lexington really has to address the future of where the growth is going to go,” Queen said. “Lexington is going to grow by attracting new businesses and new things that are going to grow the economy. We’re going to have to have housing.”
Dennis Anderson
Dennis Anderson, a developer and CEO of Anderson Communities who is also a member of the city’s Infill and Redevelopment Steering Committee and Sustainable Growth Task Force, also emphasized the housing shortage in Fayette County.
“Hyper demand [for] new housing has been created by the federal government maintaining historically low interest rates, increasing the affordability for new home buyers,” Anderson said.
“At the same time, local government is restricting supply by limiting the land available for development. When combined, these two forces increase demand but lower supply – a very basic economic principle that ends in higher prices and decreased housing affordability.”
One of the local limitations on land development lies with Lexington’s Urban Services Boundary: an urban growth boundary designed as a containment strategy to prevent urban areas from overtaking rural land. The American Planning Association estimates that more than 100 metropolitan areas utilize a growth boundary, but Lexington’s, established in 1958, was the first in the nation.
The Urban Services Boundary was first implemented to protect horse farms in the Bluegrass from disappearing due to urban encroachment. The Urban Services Boundary, which has been reconfigured a number of times throughout the years as a part of the city’s planning process, encourages higher-density development within the boundary, as well as creative infill and multi-use construction. The boundary is currently being evaluated as a result of Imagine Lexington, the City of Lexington’s 2018 Comprehensive Plan.
To make the best possible land use decisions, the city established a Sustainable Growth Task Force to spearhead a Sustainable Growth Study that has the stated goal of “developing an objective, transparent and reliable framework to inform long-term land use decisions involving the Urban Service Boundary (USB), and its role in protecting the urban and rural balance makes Lexington unique.”
Padgett, who is the chair of the Sustainable Growth Task Force, described the committee’s charge as “creating a platform for the planning staff to utilize now and in the future to determine when and if the Urban Services Area is out of land and needs to be expanded.”
“The planning staff can determine what may need to happen in different scenarios – what if we keep growing as we’ve grown to date, or what if we became a more dense community and added even more infill and redevelopment?” he said. “All of these criteria will be considered, and then it will be presented to the planning commission and the council, and they can determine where to go from there.”
Padgett added that the committee aims to provide a tool to be able to project the needs of Fayette County for the next 20 years, so that city planners can look ahead.
“It’s very interesting,” he continued. “The end product, I think, is going to be a great product that will be a great tool for the planning staff, the Planning Commission, and the City Council to use.”
While the pandemic slowed down the work of the task force by several months, Padgett says the group is back on track to provide its report to the City Council before the end of the summer.
Padgett believes the supply of housing is going to continue to decrease and demand is going to continue to expand, and Fayette County is going to have to create more diverse housing opportunities.
“Creative infill products and multi-use structures are where we’re going to end up heading. Big half-acre single family lots are going to become few and far between as we continue to grow,” he predicted.
While the consensus is that demand will continue to outpace supply, Queen says we are going to see some price stabilization in the near future. “I think we’re going to start to see new home builds pick up as material costs start stabilizing,” he said. “I don’t think we’ll see a decline in real estate pricing, but I do think we’ll see a stabilization.”
Queen credited the demand to Lexington’s livability. “People move here from large markets because of our affordability of living,” he said. “I think one of the things that attracts folks to Lexington is the convenience factor. You can really be anywhere you want in Lexington in 20 minutes. Even though Lexington has grown, it’s still a great city for commuting and convenience to shopping and entertainment, friends and family.”