In this Monthly Market Trends series, we offer you our interpretation of current trends through the eyes of our VP of Market Risk, Patrick Donoghue, and provide you with his balanced commentary so you can make the best investment decisions today, for the highest returns tomorrow.
Groundfloor has a firm presence in the Midwest and the hub of that presence is located in Wichita, Kansas. Our central lending operations team and sales leadership live and work in this area, and one of our key lending initiatives involves developing a local lending partnership there to compliment our operational presence. We have recently found that partner - Toro Partners - and are excited to start growing the loan portfolio there. So, I wanted to take a closer look at the Housing Market in Wichita for this month’s edition of Market Trends.
According to Redfin, in September 2023, Wichita home prices were up 7.9% year-over-year with a median sales price of $233k. The median days on market increased year-over-year by 3% going from 8 days to 11 days. That’s still very fast! It’s no surprise that Redfin classifies Wichita as a very competitive market.
Let’s take a deeper dive into Wichita and the surrounding Wichita Metropolitan Statistical Area ("MSA").
Wichita has a very balanced age distribution with 39% of the adult population in key home buying segments: ages 35 - 49 & 50 - 64, respectively.
Wichita MSA - Age Group Distribution
Source: US Census Bureau
The employment base in this MSA has a diverse economy with several key employers across various industries. Here are the top ten:
- Wichita Public Schools (USD 259): The local school district serving Wichita and surrounding areas.
- Spirit AeroSystems: A major aerospace manufacturer that produces aerostructures for commercial and defense aircraft.
- Textron Aviation: A leading manufacturer of general aviation aircraft, including Cessna and Beechcraft brands.
- Ascension Via Christi: A comprehensive healthcare system with multiple hospitals, clinics, and healthcare facilities.
- Wesley Healthcare: Another significant healthcare provider in the region, operating hospitals and medical facilities.
- Koch Industries: A global conglomerate with diversified interests, including energy, chemicals, manufacturing, and more.
- Bombardier Learjet: A division of Bombardier Aerospace, specializing in business jets. (Note: As of 2021, there were reports of Bombardier Learjet's Wichita facility being sold and undergoing changes, so the status may have changed since then.)
- Cargill: An agribusiness company involved in food processing, agriculture, trading, and distribution.
- Emprise Bank: A local bank and financial institution serving the Wichita area.
- Wichita State University: The city's public research university, providing education and employment opportunities.
I always like to look at what a city and the surrounding area builds its identity out from. For instance, I am from Pittsburgh, PA originally and clearly my hometown is identified by its roots in the steel industry and of course a very prolific sports scene centered around the beloved Steelers. The emblem on the helmet of the Steelers - the three diamonds in the logo - represent the three materials used to make steel: yellow for coal, red for iron and blue for steel scrap. Sorry I couldn’t resist.
Wichita has a long and storied history in the aerospace and aviation industry. It’s often referred to as the “Air Capital of the World'' because it is a major center for aircraft manufacturing, including companies like Spirit AeroSystems, Textron Aviation, and Bombardier Learjet. Not only have these companies helped lead the United States aerospace industry, but also have had a global impact. Couple this with a strong agribusiness, healthcare, and education base, it's clear to see the employment balance and diversity. Diversity in the economy is important like diversification is important in our individual portfolios. And, of course, a steady stream of diversified Groundfloor LRO’s can now incorporate a slice of Wichita offerings.
Employment remains strong in Wichita as well. The unemployment rate in Wichita, Kansas MSA is 3.6%. Below is a 5-year lookback, sourced from YCharts:
It's fair to ignore the spike caused by the 2020 Pandemic. Every MSA will have this spike. Consistently over the past 5 years, Wichita has remained well employed. For comparison, the US unemployment rate is 3.8% (as of Sept. 23), so Wichita tracks well compared to the US regarding employment. The Wichita Employment Forecast October update outlook for 2024 according to the Center for Economic Development and Business Research (“CEDBR”) sums up the forecast this way:
Let’s look at the current housing market metrics in detail:
As noted by Redfin, the housing market remains competitive and as evidenced above the Market Action Index scores this MSA as having a slight seller advantage. Even with the consistently high mortgage rates Wichita is controlled by the sellers.
The market segments break down well for Groundfloor lending, given our average loan size and preference Groundfloor can serve all of the market segment quadrants. Here is a breakdown by Market Segment Quadrant of the MSA:
You will note the DOM (days on market) provided above is higher than Redfin’s DOM referenced earlier in this article. This is because the data above takes into consideration the entire MSA, not just the City of Wichita. This can be confusing but that is the difference - a wider market outlook.
The year-over-year Median List Price by price segment has remained consistent with no large declines. In fact, median list price has increased in every price segment (YOY)
Let’s finish by looking at the Real-Time Market Profile to gauge how the metrics are stacking up.
As you can see, inventory is on the rise. If you note the sparkline (90-day lookback) as of June 2023, inventory was about 20% lower. I don’t find this shocking given the time of year (seasonality) and the rise in the 30-year mortgage rates over the past 60 days.
Price decreases are also on the rise. A bit more of an issue, but at 33%, this is the historical average of price decreases. A price decrease means that the listing price was reduced at least once. To me, this represents more normalization and seasonality than say a market panic.
We look forward to growing in Wichita!