Many of the single-family homes in the quiet neighborhood near Harry and 127th Street are completely built – with trucks parked in the driveway and basketball goals installed.
But about eight homes near the back of the subdivision aren’t quite finished yet. A loader moves dirt from the front lawn to make space for a new driveway. At another house, workers nail green siding onto the wall.
Liberty Communities, the Wichita-area developer building the homes, aims to sell new houses for between $230,000 to $290,000, according to president and owner Eric Gilbert. That’s less expensive than most new builds in Wichita, which had a median sale price of more than $380,000 last year.
“He’s selling the dickens out of them,” said Wess Galyon, the director of the Wichita Area Builders Association, of Gilbert’s homes.
The Liberty homes are coming into a market that desperately needs them: In 2023, Wichita had at most half the amount of housing inventory of a healthy market. Local housing advocates estimate the city should have thousands more affordable units.
Despite the need, new home construction in Sedgwick County went down last year. The county appraiser estimated a dip in new construction of almost 12%, an estimate that included single-family homes, duplexes and quadplexes. Single-family building permits fell by 9 percent in the Wichita area, according to the Wichita Area Builders Association.
Why?
“Inflation, and how fast and high it went up and stayed up — and also interest rates,” Galyon said.
Local experts and developers are fairly unanimous in their reasoning. They say in addition to the rising cost of materials, buyers didn’t want – or couldn’t afford – to move into more expensive new homes with interest rates reaching 7 percent. The Federal Reserve raised interest rates 11 times between 2022 and 2023 to combat inflation.
Jeff Mullen is with Ritchie Development. He typically builds single-family homes in Wichita starting at around $400,000 and up.
“For folks that are sitting there on a 2½ or 3% mortgage, talking about going up to 7½ percent mortgage, that’s a lot,” Mullen said.
“You’re basically paying two to three times monthly what you were just because your interest rate. … so you had buyers that were hesitant to go buy.”
Buyer hesitance means a lot to builders and developers like Mullen, who are focused more on custom builds instead of “spec” homes. Custom houses typically have an agreed-upon buyer before they’re even constructed. Meanwhile, with “spec” homes, the developer finds a buyer after financing and building the home.
Stan Longhofer is the director of Wichita State University’s Center for Real Estate. He says the move toward custom-built homes is a major trend in single-family home development in Wichita.
“That ratio of spec to custom homes has shifted much more towards custom homes … for the last 15-plus years,” Longhofer said. “And home builders are just really cautious about overextending themselves too far with, you know, building homes without having a buyer in hand up front.”
Custom homes are less risky for developers, but they mean new home construction is driven largely by buyers instead of builders.
Meanwhile, prices at Liberty Communities are attainable enough that Gilbert says he still sees plenty of demand despite high interest rates. But he says many developers aren’t building in this price range.
“It’s pretty tough to build that price point with the rising cost of materials and labor,” Gilbert said. “Without giving any trade secrets … it takes a different thought process and way of doing business to get down to that price point.”
Expensive materials are especially hard on nonprofit developers, like HOPE Community Development Corporation. The organization builds affordable housing on vacant lots in Wichita’s city center, and it works with government programs that limit the maximum price of the home.
The Rev. Dr. Kevass Harding said he had to put off the construction of two homes last year because the cost of building outweighed the amount for which he could sell it.
He’s fundraising to fill that gap, but it slows down his construction.
“Because of the material costs, across the country, … it’s even harder to build affordable housing,” Harding said. “From a three-bedroom, two-bath, we’re looking at now a two-bedroom, one-bath.”
So will the dip in construction in 2023 have a long-term impact on Wichita’s housing shortage?
“My initial reaction to the answer to that is probably not,” Longhofer said.
Galyon agreed, saying it’s unlikely to change housing affordability in Wichita.
Instead, Longhofer said the root cause behind Wichita’s housing shortage is the fallout from the 2008 recession. Home building cratered in years following it, not rising above 1,100 new permits a year between 2010 and 2019. Pre-recession norms were closer to 2,000 homes a year, if not more.
Mullen said Wichita’s major challenge is that the city hasn’t made up for the homes that weren’t built in those years.
“You had eight years where you’re underbuilding by 300 homes, and two more years where you’re underbuilding by 500 homes,” Mullen said. “You know, that’s 4,000 homes you got to pick up somewhere. And that’s going to take a little bit of time to do.”