Kansas City, Missouri
2024 Could be a Great Year for the “City of Kansas”
By Carole VanSickle Ellis
As early in American history as 1803, Kansas City, Missouri (KCMO), was attracting new residents thanks to its location, which was, as explorers Lewis and Clark put it, “a good place to build a fort.” Not long after this report reached New York state, the city was formed by a group of settlers led by Latter Day Saints founder Joseph Smith. Although Smith and his followers spearheaded early development and built the first school within KCMO’s city limits, they soon left the area to trappers, traders, and ferrymen, who eventually expanded the municipal area to include multiple small ports and attracted other businesses and residents to the area.
By 1853, when the “City of Kansas” was created in the state of Missouri, KCMO was well on its way to becoming the vital center of trade, logistics, technology, and manufacturing that
it is today.
“Kansas City is now emerging as a growing market for real estate investments,” observed founder and CEO of Norada Real Estate Investments Marco Santarelli in November 2023. He cited the city’s recent downtown revitalization project and relative affordability as key attributes attracting both real estate investors and retail buyers to the area.
“More than $6 million has been spent giving the downtown area a facelift and a new makeover, including apartments, offices, and condominiums,” Santarelli said. He continued, “These facelifts have also been done in both indoor and outdoor malls, restaurants, and places for concerts, plays, and other forms of entertainment…making Kansas City properties appealing to investors and homebuyers who are looking for gains or cash flow.”
Kansas City, like many other areas of the country, is currently experiencing a housing crunch, which, in combination with its relative affordability compared to other regions, is creating a single-family rental market primed and ready for new residents from out of town.
According to the Kansas City Regional Association of Realtors (KCRAR), residential homes are spending just over a month on market (up just over 15% in November 2023 year-over-year) and average sales prices are also still rising, up 9.6% year-over-year. However, more than 9% fewer sales are actually closing, and housing supply is on the rise, albeit still quite low at 2.1 months. This is more than 10% higher than the same time last year, however, and home prices are still rising.
Job Growth, Remote Work & Great Expectations
Thanks to burgeoning job numbers in the KCMO area, especially in the tech and IT space, many analysts say 2024 could be a strong year for Kansas City real estate and local employers. With fully 20% of Kansas City workers reporting they are full-time and working remotely, the area is full of households seeking residential options that provide enough space for a home office and a family.
“The geographic decoupling of worker and workplace is here to stay,” wrote KC Tech Council president and CEO Kara Lowe in the group’s KC Tech Specs report published midway through 2023. She added, “[This is] evident in both the increased share of hybrid or fully remote tech job postings and the increased migratory patterns of college degree holders moving from the largest coastal tech hubs toward mid-sized cities across the United States.”
Lowe noted that in 2023, KCMO “hiring is up, tech workforce has grown, and Kansas City is importing more college graduate-level talent than any time in the last couple decades.”
In the report, KC Tech Specs predicted the momentum KCMO generated during the COVID-19 pandemic and built in the aftermath would likely result in growth in the digital health, cybersecurity, tech infrastructure, and tech manufacturing industries in the area in the coming years.
Evidently, the current presidential administration agreed, naming KCMO one of two Missouri “future technology hubs in the United States” in late October 2023. The designation comes with the opportunity to compete with 29 other tech hubs throughout the country for up to $75 million in “implementation grants” intended to help local businesses and municipal organizations further develop “innovative industries” including semiconductors, clean energy, critical minerals, biotechnology, precision medicine, artificial intelligence, and quantum computing. KCMO’s Kansas City Inclusive Biologics and Biomanufacturing Tech Hub, which is led by BioNexus KC and operates in both the Missouri and Kansas portions of the metro area, was specifically cited as “a global leader in biologics and biomanufacturing, increasing domestic production of life-saving vaccines and other preventative technologies.”
With the support and ongoing growth of attractive, well-paying jobs in the area and a housing market that may be a little too tight even for high-earning professionals, KCMO will likely continue to be a strong performer for long-term rental owners in 2024.
Missouri has long been considered a “landlord-friendly” state thanks to relatively lenient laws governing rent control and evictions, but KCMO does have stringent regulations in place for short-term rentals like Airbnb and VRBO properties. Short-term rental operators must apply for a license or face penalties, and non-resident short-term rentals cannot be located within 1,000 feet of each other or surpass 25% of the units in a building. Short-term rentals in residential neighborhoods are, in some areas, entirely banned.
The regulations are intended to reduce Airbnb issues in neighborhoods and free up housing for long-term residents, both owners and tenants.
“When the number of homes are being removed from the marketplace to be used as short-term rentals, it really eliminates housing opportunities for Kansas Citians,” explained local neighborhood association president Laura Burkhalter, who supported the restrictions. Local investors, however, say the restrictions can be difficult to navigate and dislike new taxes and fees imposed on short-term rental properties.
With rents projected to rise for long-term residential rentals in KCMO in the coming months, short-term rental owners may elect to make a shift to longer leases rather than exit their investments in the area.
As of Q3 2023, rents on single-family residential (SFR) homes had risen 4%, and, while that increase is relatively low compared to adjacent Kansas City, Kansas, which boasted a rental rate increase of 17% during the same time period, rising population and demand seems to indicate the market will continue to be sound for both rental investments and assets sold at retail in the coming year.
SIDEBAR 1
By the Numbers
4,400 — More than 4,400 tech businesses are located in the KCMO metro area, but, according to the KC Tech Council, there is still strong demand for workers
20% — One in five workers in Kansas City is working remotely
72 — 72% of tech company executives in the KCMO area report plans to boost employee wages by April 2024
266 — Demand for data scientists and analysts is projected to rise in the metro area by 266% over the next 10 years.
8 — Bankrate.com ranked KCMO 8th in the nation on its list of “Best Places for Young Professionals to Start Their Careers” in 2023
5 — Bankrate.com ranked KCMO 5th in affordability in 2023
SIDEBAR 2
Why is Kansas City in Missouri?
If you are like most people who do not live in Kansas or Missouri and did not pay a lot of attention to your primary-school geography lessons, you will probably be surprised to learn that Kansas City is not located in the state of Kansas, alone, but also in Missouri. In 1853, the name, “City of Kansas” beat other contenders on the Missouri side of the city, including “Rabbitville” and “Possum Trot,” in large part because the area was becoming an early trade hub and it was located on the Kansas River.
The state of Kansas was still only a territory and actually named its Kansas City after KCMO in 1872 in hopes of capitalizing on growth happening on the Missouri side of the state line.
For nonnatives, it can be difficult to tell where KCMO ends and Kansas City, Kansas, begins. KCMO is located in west Missouri, and the metro area spills into the northeastern part of Kansas. The dividing line is the state line between Missouri and Kansas, and each city has its own local government, school system, police and fire departments, and municipal services. The two cities often work together on regional issues, and residents often commute between KCMO and Kansas City, Kansas for work or recreation. They are part of the same metropolitan statistical area (MSA), called the Kansas City, MO-KS metro area, so statistical data that appears to apply to one of the cities may, in fact, apply to both.
SIDEBAR 3
KCMO’s Place in the Home Commissions Lawsuit & Verdict
Lately, Kansas City, Missouri, has been at the top of real estate headlines due to the $1.8 billion verdict handed down against the National Association of Realtors (NAR) by a jury in the area rather than because of its hot housing market. Near the end of 2023, a Kansas City jury found NAR and several other real estate brokers guilty of “conspiring to inflate costs for Missourians selling their homes” and demanded NAR and other defendants pay more than 260,000 homeowners nearly $2 billion in damages. Attorneys for the plaintiffs predicted the ultimate payout would be even higher, saying that damages would be “automatically tripled to nearly $5.4 billion” under the Sherman Antitrust Act. NAR spokesman Mantill Williams told the Kansas City Star, “The matter is not close to final,” and predicted myriad appeals. Williams also warned that interim steps to address the verdict would include asking the court to reduce the damages awarded and that “it will likely be several years before this case is finally resolved.”
The verdict is unlikely to affect the local market in ways distinct from other areas of the country. Most analysts predict the most immediate fallout from the verdict will come in the form of increased disclosure responsibilities for agents, buyers, and sellers, but that will be a national response rather than a local one. “The case placed a big, red bullseye on the industry,” observed Real Trends Consulting partner Steve Murray in an interview with Money Watch this past November. Murray predicted ultimately the system will not change quickly, if at all, and said, “Consumers use the system because it works for them.”
