Kansas City’s 2025 Housing Outlook

By Jeanene Dunn

 

Experts Unpack Market Trends, Affordability Concerns and Opportunities for Growth

The Kansas City MSA has seen a 54 percent home price increase since Covid — 51 percent for Missouri and 48 percent for Kansas. “That’s not sustainable,” according to Dr. Robert Dietz, chief economist of the National Association of Home Builders, at the KCHBA’s recent 2025 Economic Forecast Breakfast.

Deitz, along with Dr. Stanley Longhofer, director of the WSU (Wichita State University) Center for Real Estate, explored the dynamics of Kansas City’s housing market. They addressed critical factors such as mortgage interest rates, inflation and supply constraints, providing a comprehensive outlook for 2025.

 

Rising Interest Rates and Inflation Concerns
Both emphasized how inflation continues to shape the housing market. Dr. Longhofer noted that inflation expectations have risen slightly, impacting the cost of borrowing. “While mortgage rates have stabilized in the 5 percent to 8 percent range, inflationary pressures are adding to overall market uncertainty,” he explained.

Dr. Dietz added that the Federal Reserve’s ongoing efforts to combat inflation, including reducing its holdings of mortgage-backed securities, have kept mortgage risk premiums elevated. “These factors contribute to higher borrowing costs for buyers, further straining affordability,” he said.

Despite these challenges, they both agreed that inflation appears to be moderating compared to its peak, offering some hope for economic stabilization.

 

The Supply and Demand Equation
Kansas City’s housing market continues to face a mismatch between supply and demand. Dr. Longhofer highlighted the persistent shortage of active listings, which remain below pre-pandemic levels. “Total home sales are expected to see a modest 1.1 percent increase in 2025, reaching approximately 36,300 units,” he shared. However, inventory constraints mean buyers may face limited options.

Dr. Dietz pointed to the challenges in new home construction, exacerbated by labor shortages and rising material costs. “Construction costs have increased significantly due to inflation, which limits the ability to deliver affordable housing,” he said.

 

Affordability and Price Growth
Home prices in Kansas City are projected to appreciate by 5.6 percent in 2025, continuing a trend of steady growth. However, affordability remains a key issue. Dr. Longhofer explained that higher mortgage rates and inflation are making it increasingly difficult for buyers, especially first-time homeowners, to enter the market. “Affordability challenges aren’t just about home prices—they’re about the overall cost of living,” he emphasized.

Dr. Dietz suggested that targeted policy interventions could alleviate some pressures. “We need to focus on workforce development in the construction industry and reduce regulatory barriers that increase costs unnecessarily,” he said.

 

Looking Ahead
Despite the challenges, both experts expressed cautious optimism about Kansas City’s housing market in 2025. Dr. Longhofer described the market as “resilient,” while Dr. Dietz highlighted opportunities for innovation in construction and housing solutions. “The future lies in addressing inflationary pressures head-on and finding creative ways to expand housing access,” Dr. Dietz concluded.

 

Notable quotes from Dietz and Longhofer
“Inflationary pressures are adding to overall market uncertainty, but there are signs of stabilization on the horizon.”
—Dr. Stanley Longhofer

“Construction costs have increased significantly due to inflation, which limits the ability to deliver affordable housing.”
—Dr. Robert Dietz

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