While single-family new-home construction fell 21 percent to 9,359 units last year, multifamily construction more than doubled. Permits for rental apartments jumped 122 percent while multifamily for-sale permits including condominiums and townhomes increased 102 percent. Nationwide, total new-home permits were down 14 percent for the year-to-date through November. By comparison, total new-home starts in metro Kansas City were down just 6 percent last year.

The decline in single-family new-home starts is viewed as a necessary step toward bringing the local housing market into balance, according to HBA Executive Vice President/CEO Tim Underwood.

“The past year has been a year of transition for the local housing market, with the primary focus of local home builders to reduce speculative new-home starts,” Underwood said. “We’re seeing positive signs that this is happening and expect new-home sales to outpace starts in early 2007.”

Underwood said a key element of the transition of the local housing market has been the shift in where new-home development is occurring. While Johnson County has lost more than one-third of its market share during this decade, emerging markets such as the Northland and Cass County have surged. Cass and Platte counties gained the most market share in 2006, picking up two share points each to 12 percent and 9 percent respectively.

Johnson County accounted for 27 percent of all single-family home permits in 2006, down from a peak of 44 percent in 1998. Meanwhile, Jackson and Cass counties accounted for 35 percent of new-home permits last year, up from 29 percent in 1998. The Northland now accounts for 26 percent of new-home construction, up from 21 percent over the same time frame.

Housing affordability has played a significant role in the change of where new-home buyers are shopping, Underwood explained. Johnson County is the area’s most expensive housing market, where a 7 percent hike last year left the county’s average new-home price at more than $346,000 according to the Kansas City Regional Association of Realtors. Cass County, which ranks among the fastest-growing counties in recent years, posted an average new-home sales price of around $241,500, more than $100,000 less than Johnson County.

“Without a doubt the strongest housing markets in the metropolitan region are those locations that provide an array of housing choices that best meet the market demand,” Underwood said. “There is little doubt that Johnson County and other areas of the metro have lost market share due to a lack of housing choices for families and households headed by teachers, nurses, police officers, firefighters, retail sales workers and many other professionals. New-home prices during the last decade have soared while household incomes have remained flat. It’s imperative that we explore new housing choices including infill redevelopment, mixed-use and mixed-income projects and innovative designs that maximize infrastructure and help reign in the cost of providing services to these new communities.”

While Kansas City has long held the image of being an affordable housing market, several recent studies have brought that reputation into question. Studies by the Brookings Institution and the Center for Housing Policy have shown that long-distance commutes precipitated by a lack of housing choices, low-density sprawling development and a lack of a mass transit solutions add a heavy load onto combined housing and transportation costs. The Center for Housing Policy study showed Kansas City households spent more than one-third of their income on transportation, the highest percentage of any of the 28 metropolitan regions included in the research. Another Center for Housing Policy study put Kansas City near the middle of the pack in terms of housing affordability, with higher housing costs than other peer cities including St. Louis, Memphis and Indianapolis.

“As a metropolitan region, we need to recognize that housing is part of a bigger picture that includes economic development, transportation and quality of life issues,” Underwood said. “Creating a housing plan for the region that recognizes challenges such as changing demographics, rising construction costs and obstacles to progressive developments will go a long way toward bringing the right housing choices consumers need and want.”

Looking toward the coming year, Underwood said overall market fundamentals for the housing market remain generally positive. While a pickup in job growth would definitely boost the housing market, low mortgage rates should remain a powerful incentive for consumers looking to buy now rather than waiting and paying higher interest costs later this year.

“We’ve been very fortunate that low mortgage rates have helped many families bridge the gap in financing a new-home purchase in recent years,” Underwood said. “Overall mortgage rates remain very low and in the favor of new-home buyers. Consumers need to understand that rising rates can impact their ability to finance a new-home purchase even more than rising new-home prices.”

Kansas City, Mo., led the metro area in new-home construction for the fifth-straight year in 2006 with 2,033 single-family units. The top four municipalities were unchanged from 2005, with Olathe ranking second with 849 units followed by Lee’s Summit with 616 and Overland Park with 499. Kansas City, Kan./Wyandotte County ranked sixth with 473 units, replacing Shawnee which fell out of the top 10.

Unincorporated Platte County moved into the top ten at No. 6 with 334 units followed by fellow newcomer Belton at No. 7 with 329 units. Lenexa also moved into the top ten up at No. 8 with 325 units while Independence moved up one spot to No. 9 with 300 units. Raymore rounded out the top slipping three spots with 290 units.

The Home Builders Association of Greater Kansas City (HBA) is the voice of the housing industry and the source for housing information. Comprising more than 1,000 member companies, the HBA represents an industry that contributes more than $2.5 billion to the Kansas City economy and supports more than 36,000 jobs in the Greater Kansas City metropolitan area.