Although the metro area finished the year down 7 percent compared to last year, the performance of the single-family construction market was in line with expectations at the beginning of the year that forecast a slight decline in 2005. Two key factors in the dip in new-home construction were rising mortgage rates and higher than normal inventory levels entering 2005. Long-term mortgage rates rose more than a half-point during the year and the annual average mortgage rate was the highest since 2002. However, strong new-home sales during the past year have left the housing market fundamentals in a favorable position entering 2006, according to HBA Executive Vice President/CEO Tim Underwood.

“Overall, 2005 was an excellent year for housing in metropolitan Kansas City,” Underwood said. “We have seen improvements in speculative home inventory and we are encouraged that new-home sales show that despite higher mortgage rates there is still a heavy demand for new-home ownership.”

Underwood said that despite the successes the past year, there are still challenges facing the ever-changing residential construction market.

“The permit numbers underscore the changes that are taking place,” Underwood said. “The No. 1 goal of housing in Kansas City should be providing the housing choices that are demanded by consumers. That includes everything from apartments and homes for first-time buyers through the move-up market and upper-bracket households. That will require communities, the building industry and the public to work together to promote better housing choices that meet the demands of today’s consumers.”

The past year was unusual year in that the three large housing markets in Johnson, Jackson and Clay counties all posted construction decreases of 10 percent. Johnson County’s market share slipped to 30 percent, the lowest market share achieved by the county during the last quarter century. After steady gains in recent years, the Northland market held steady at 24 percent with declines in Clay County offset by an 11 percent gain in Platte County. Jackson County dropped one point to 21 percent. Miami County also fell one point to 2 percent market share.

The biggest gainers in market share were Cass County, up two points to 11 percent and Wyandotte and Leavenworth counties, both up one point to 6 percent.

“The one consistent trend in new-home construction in recent years has been the movement toward communities with a broader mix of housing choices where consumers can get more home for their money,” Underwood said. “The largest segment of the housing market remains the new-home buyer and first-time move-up buyer, and that has proven to be the most difficult market for home builders to reach due to escalating land values, higher material prices and outdated development policies. We need to think outside the box to develop common sense solutions that will promote progressive development patterns that will help builders and developers reach underserved segments of the market.”

Underwood said there signs that both communities and the industry are responding to these changes. “I see growing recognition of the challenges we facing in providing housing for the fastest growing household groups, such as empty nesters and young singles. The typical Kansas City household is continuing to shrink to less than 2.5 persons and less than one-quarter consist of traditional families with children. The future of housing in Kansas City will mean building homes that reach these groups, ranging from lofts and condominiums in the urban core to both conventional and traditional neighborhoods in the suburbs that provide a mix of housing choices.”

Kansas City, Mo., led the metro area in new-home construction for the fourth-straight year with 1,749 single-family permits. The top five municipalities were unchanged from 2004, with Olathe ranking second with 875 permits followed by Lee’s Summit with 791, Overland Park with 674 and Kansas City, Kan/Wyandotte County with 494.

Raymore move up one spot to No. 6 with 483 single-family permits, followed by Shawnee with 402. Gardner fell two spots to No. 8 with 399 permits while Independence broke into the top 10 with 376 permits. Lenexa rounded out the top 10 falling one spot with 345 permits.

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.