By
Hannah Griffith
|
9 min read
|
January 17, 2023

Kentucky Housing Market Report - 2023 Update

Kentucky Housing Market

What is the Kentucky Housing Market Like?

Like most of the country, the Kentucky housing market has been going through a wild ride in the past couple of years. As many workers acquired more mobility than ever in the wake of the COVID-19 outbreak thanks to widespread remote work, which allowed them to choose their place to live independently of their place of employment, many set their heart on finding a home amid greener pastures, encouraged by the historically low interest rates. As a result, the Kentucky housing market has been testing new heights every month and is still on its way up, although at a slower pace since the sharp increase in mortgage rates earlier in 2022.

According to data collected in November 2022, the latest available at the time of writing, the median sale price in Kentucky had reached $234,400, representing a 5.0% increase compared to the previous year. Properties are still selling relatively fast, with 32 median days on the market, almost unchanged since the year prior. 19.4% of homes are selling above the listing price, but the proportion of properties selling for higher than expected is steadily declining.

It is not the only sign that the Kentucky housing market may be cooling down, as the cost of borrowing money has increased sharply since the Federal Reserve Bank initiated an aggressive monetary policy to fight back against inflation. The number of real estate transactions has also declined, with 3,187 houses sold in November 2022, 27.8% less than in November 2021. Inventory is slowly increasing, reaching three months of housing supply available in November 2022. Although it is an improvement compared to the one month available in November 2021, it is still a long way away from the five to six months necessary to reach a balanced market, according to real estate experts.

Kentucky house prices

How does the Kentucky Housing Market Compare with the National Housing Market?

Kentucky house prices may have increased noticeably in the past couple of years, but they remain significantly more affordable than the national average. Besides, the Kentucky housing market has been rising at a more moderate pace compared to many places across the country since the COVID-19 outbreak. Unlike some other locations around the country, which have attracted new residents in droves, Kentucky is actually losing approximately 2,000 more residents than it is gaining every year, and the available inventory is slowly gaining pace on the demand/.

However, it should be noted that Kentucky also has one of the highest poverty rates in the country. The cost of borrowing money is bound to continue to increase in short- to mid-term. The Fed has initiated a hawkish interest rate hiking policy since March 2022 with several significant rate increases, and more likely in the works before inflation slows down to a targeted 2% rate. As mortgage rates continue their upward trajectory, it is likely that the demand will decrease accordingly as potential home buyers find themselves priced out of the market or consider postponing their home-buying plans until the mortgage rates become more affordable. Nevertheless, at the time of writing, it appears that there are still some ways to go before the demand for housing and inventory align, and the Kentucky housing market remains a sellers’ market where home prices are still higher than they were the previous year.

Kentucky Metro Areas with the Hottest Housing Markets

Kentucky is not known as the Bluegrass State for nothing. Its economy is based on agriculture, with most of the state’s rolling hills being used for horse breeding, beef cattle, corn, and tobacco production. Kentucky's economy has also expanded into non-agricultural sectors, including auto manufacturing (the state ranks 4th among US states in the number of automobiles and trucks assembled), energy fuel production, and medical facilities. The economic and demographic center of the state is known as the Golden Triangle. It includes the metropolitan areas of Louisville, Lexington, and Northern Kentucky, which have a combined population of 2,402,958 as of 2018, representing 54% of the state's total population on only about 19% of the state's land. Here are the hottest housing markets in Kentucky in terms of volume.

  • Louisville
  • Lexington
  • Bowling Green

Louisville

Louisville is the largest city in Kentucky, with a population of 782,969, according to the US 2020 Census. Louisville's economy has been anchored by the shipping and cargo industries since its earliest days, thanks to its strategic location in the central United States, which place it within one day's road travel to 60% of the cities in the continental U.S. It is also a significant center of manufacturing and bourbon production. The Louisville housing market is very competitive, with listed properties receiving two offers on average. Louisville home prices are still rising at a moderate pace: 25.6% of houses sold above the asking price in November 2022, and the median sale price has increased to $225,000, 2.3% higher than the previous year.

Lexington

Lexington is the second-largest city in Kentucky, with a population of 322,570, according to the 2020 US Census. It is known as the "Horse Capital of the World" and has one of the nation's most stable economies thanks to the presence of corporate headquarters of Fortune 500 companies and large manufacturing plants. The Lexington housing market is very competitive. Homes in Lexington receive three offers on average, with 22.5% of them selling above the asking price, and stay on the market for a median number of 17 days. Lexington home prices are still climbing rapidly despite the recent interest rate increase, shooting up to $297,450 in November 2022, 14.4% higher than the previous year.

Bowling Green

As of the 2020 census, Bowling Green had a population of 72,294, making it the third-most-populous city in Kentucky. It is home to numerous manufacturers, including General Motors, Spalding, Fruit of the Loom, and the center of production for all Chevrolet Corvettes since 1981. However, Bowling Green is shifting to a more knowledge-based, technology-driven economy thanks to the presence of one major public university (Western Kentucky University) and a technical college. The Bowling Green housing market is somewhat competitive. Bowling Green home prices are increasing moderately, reaching $225,000 in November 2022, 1.9% more than in November 2021. The average homes sell for about 4% below the list price and go pending in around 57 days.

Higher Mortgage Rates Could Slow Down Price Growth in Kentucky

At the time of writing, Kentucky home prices are still following an ascending curve despite the sharp increase in interest rates since March 2022. As inflation climbed to a forty-year high in the wake of the monetary policies initiated to protect Americans’ livelihood and supply chain issues due to the COVID-19 pandemic, the Federal Reserve Bank started an aggressive interest rate hike policy. The average mortgage rate at the time of writing is hovering around 7%, twice as high as it was in previous years as it stood near historic lows.

As the cost of borrowing money increased sharply and the sale price is still at record highs, the average mortgage in 2022 is significantly higher than it was in the previous year. Therefore, the buying power of would-be home-buyers has been diminished. Many have been pushed to the sideline or put their home-buying aspirations on the back burner until mortgage rates return to more affordable levels. As the demand decreases, Kentucky home prices are expected to stabilize or decline slightly as well following a market correction.

Key Market Stats for the Kentucky Housing Market

According to November 2022 data, some of the key market stats for the Kentucky housing market appear as follows:

  • Median home price: $234,400 – a 5.0% Y.o.Y. increase.
  • Home sales: 3,187 – 27.8% less than a year ago.
  • Months supply of inventory: 3 – compared to 1 in November 2021.
  • Mortgage rates as of December 1st, 2022: 6.49%

Kentucky Historic Price Changes and Affordability

Although Kentucky home prices remain relatively affordable compared to the national average, the Bluegrass State also has one of the highest poverty rates and lowest income per capita in the country. Meanwhile, the median home price has increased from $176,000 in November 2019 to $234,400 in November 2022, with a peak of $252,400 in June 2022, representing a 33.18% increase in 36 months.

Unfortunately, local incomes have not increased at the same pace. Housing affordability remains a concern in Kentucky, particularly as inflation increases and property prices keep rising, although at a slower rate than in previous months.

Key Takeaways

  1. Kentucky home prices are relatively affordable compared to the national level, but the Bluegrass state struggles with one of the highest poverty rates in the country
  2. Kentucky housing prices are still rising in the year-over-year comparison, but at a more moderate pace compared to previous years
  3. The demand for housing is still higher than the available inventory, keeping property prices high.

2023 Kentucky Housing Market FAQ