The Lexington real estate market is sizzling. Real estate prices continue to surge, and monthly sales totals consistently hit record highs as the demand for housing remains strong. According to local real estate experts, sellers are in the driver’s seat and the market isn’t losing momentum in 2022.1
Located only 74 miles from Louisville, Lexington is an attractive option for people looking for an alternative to big city living. Lexington is known as the Horse Capital of the World, and is home to famous race courses such as Keeneland, The Red Mile, and the Kentucky Horse Park.
The economy of Lexington is diverse, with business sectors such as manufacturing, technology, education, and healthcare helping to keep the job market well balanced. Some of the largest corporations located in the Lexington-Fayette metropolitan area include Amazon, Lexmark International, Lockheed-Martin, IBM, Trane, and United Parcel Service.
Lexington is home to the Festival of the Bluegrass, the oldest bluegrass music festival in Kentucky. The University of Kentucky boasts the most popular sports teams in Lexington, and the men’s Kentucky Wildcats basketball team is proud to be one of the most winning programs in NCAA history.
Here’s what investors should consider when investing in Lexington, Kentucky.
>>Explore Roofstock's Lexington properties here.
Population growth
The entire state of Kentucky is growing as people move to the state for a lower cost of living and a better quality of life. According to the most recent census, the population of the Lexington-Fayette urban area has grown by 9% over the past decade, while Scott County immediately north of Lexington posted the largest growth in the state at 21% over the last 10 years.2
Key population stats:
- Lexington is home to over 322,000 people, with over 517,000 residents in the Lexington-Fayette metropolitan area.
- Lexington is the second-most populated city in Kentucky, right behind Louisville.
- The population of Lexington is growing at an annual rate of 0.22% and has grown 9.0% since 2010.
- Lexington has a bigger population than St. Louis, Cincinnati, and Pittsburgh.
- The Bluegrass Region has a population of more than 640,000 residents living in eight counties including Fayette County (where Lexington is located), Madison, Jessamine, Scott, and Clark counties.3
- Per capita income in the Lexington metro area is $34,203, while median household income is $60,769.
Job market
The unemployment rate in Lexington is down to 3.2%, according to the most recent report from the U.S. Bureau of Labor Statistics (April 2022). Job sectors showing the biggest signs of growth include trade and transportation, information services, financial activities, professional and business services, and leisure and hospitality.4
Key employment stats:
- GDP for Lexington-Fayette, Kentucky is over $29.7 billion, according to the Federal Reserve Bank of St. Louis, and has grown by more than 37% over the past 10 years.5
- Unemployment rate in Lexington is 2.8% (as of April 2022).
- The Lexington Chamber of Commerce reports that Lexington has been ranked among the best places for business and careers, and the most inspiring city for artists.6
- Top target industries in Lexington include advanced manufacturing, animal sciences, clean technology, and software and information technology.7
- Major employers in the Lexington-Fayette metropolitan area include the University of Kentucky, Kentucky State Government, Toyota Motor Manufacturing, Fayette County Public Schools, Amazon.com, Inc., Lexmark International, Inc., and Baptist Health Lexington.8
- Colleges and universities in Lexington and the Bluegrass Region include Eastern Kentucky University, Midway University, University of Kentucky, and the Bluegrass Community & Technical College.
- Lexington is located just 74 miles from Louisville and 81 miles from Cincinnati.
- The transportation infrastructure of Lexington includes several Interstate and State highways, along with freight and passenger rail service.
- Blue Grass Airport in Lexington is served by major airlines such as Delta, Allegiant, and American with direct flights to 15 destinations including Chicago, Minneapolis, Detroit, Atlanta, Charlotte, Orlando, Dallas, and Houston.
Real estate market
Real estate prices in Lexington, Kentucky, are soaring to all-time highs, with the median sales price of homes in Lexington up 6% year-over-year (as of March 2022), according to the Lexington-Bluegrass Association of REALTORS.9
The Association reports that appointments to view listings are on the rise, and real estate sales in Lexington have reached all-time highs, exceeding $3 billion through the first 9 months of 2021.10
Key market stats:
- The Zillow Home Value Index for Lexington is $283,470 as of May 2022.11
- Home values in Lexington, Kentucky have increased by more than 60% over the past five years.
- The median listing price of a home in Lexington is $318,500 based on the most recent report from Realtor.com (April 2022).12
- The median listing price per square foot for a home in Lexington is $164.
- The median sales price of a home in Lexington is $285,000.
- Lexington is ranked as a seller’s market by Realtor.com, which means that there are more people looking for a home to buy than there are homes for sale.
- Median days on market in Lexington is 37 days.
- Sale-to-price ratio is the Lexington real estate market is 101.11%, with homes selling for slightly above the asking price on average.
- Some of the most popular neighborhoods in and around Lexington for buyers and renters include Liberty Area, Masterson Station, and Bryan Station.
- Of the 113 neighborhoods in Lexington, Lansdowne Shadeland East is the most expensive with a median listing price of $875,000, while the most affordable neighborhood in Lexington is Bryan Station where homes have a median listing price of $199,900.
Strong renters’ market
The housing market in Lexington is so hot that many people are getting priced out and turning to renting instead. Rent in the city increased by 3.7% in May, more than three times the increase nationally.13,14
Even though rents are on the rise in Lexington, prices here are still relatively affordable. According to RentCafe, Lexington ranks among the best cities for renters based on key metrics such as affordability, neighborhood quality, and opportunities for job growth.15
Key market stats:
- The median rent for a 3-bedroom home in Lexington is $1,350 (as of June 2022), according to Zumper.16
- Rents in Lexington have increased by 4% year-over-year, based on the most recent information from Zumper.17
- 39% of the households in Lexington are occupied by renters.
- The most affordable neighborhoods for renters in Lexington include Pleasant Green Hill, Picadome, and Garden Springs.
- Lexington’s most expensive neighborhoods for renters include Historic South Hill, Liberty Area, and Masterson Station.
Historic price changes & housing affordability
Two metrics that real estate investors use to help forecast current and future demand for rental property include changes in housing prices and the affordability of housing in the market.
The Freddie Mac House Price Index (HPI) report is one resource investors use to measure the typical price inflation of homes. According to the most recent HPI report released by Freddie (April 2022), home prices in Lexington have grown by nearly 54% over the past five years:18
- April 2017 HPI: 142.99
- April 2022 HPI: 220.18
- 5-year change in home prices: 53.98%
- One-year change in home prices: 15.48%
- One-month change in home prices: 1.46%
Tracking the Housing Affordability Index (HAI) of housing in a market can also offer an idea of how many people will choose to rent rather than own. As a rule of thumb, the more affordable home prices are, the more people choose to buy rather than rent.
However, even though home prices in a market like Lexington may be relatively affordable, a shortage of homes to buy may cause people to rent rather than own. That may be one reason why 39% of the households in Lexington-Fayette are occupied by renters.
HAIs use 100 as a baseline index number. The greater the affordability index is above 100, the more affordable a market is, and vice versa.
Based on the most recent HAI data through July 2021, the housing affordability index in Lexington is 145. That means that Lexington is one of the most affordable places in Kentucky to own a home, provided that residents with the median household income can find a median priced home to purchase.19
Quality of life
Lexington receives an overall A grade from Niche.com, with high ratings for quality of life metrics like public schools, housing, and nightlife. Best of all, the cost of living in Lexington, Kentucky is nearly 11% below the national average.20,21
Key quality of life stats:
- Lexington-Fayette is ranked as one of the best place to live and retire by U.S. News & World Report.22
- Lexington receives high scores from U.S. News for value, job market, quality of life, and net migration.
- Over the years, Lexington has been recognized as one of the most affordable big cities in America, the best place for business and careers, the best state of entrepreneurial activity, and one of the best college towns in America.23
- The University of Kentucky in Lexington is ranked as one of the best colleges in the state.24
- Chandler Hospital has been named the best hospital in Kentucky for five years in a row.25
- The University of Kentucky’s athletic program, the Kentucky Wildcats, are the most popular sports teams in Lexington.
Get out the map
Where to begin your search? Roofstock created a heat map of Lexington based on our Neighborhood Rating, a dynamic algorithm that enables you to make informed investment decisions by measuring school district quality, home values, employment rates, income levels and other vital investment criteria.
DARK GREEN: 4-5 star neighborhood
LIGHT GREEN: 3.5-4 star neighborhood
YELLOW: 2.5-3 star neighborhood
ORANGE: 2 star neighborhood
RED: 1 star neighborhood
Ready to invest in the Lexington housing market? If you haven't already done so, create your free Roofstock account and set up alerts. We'll notify you when we have a Lexington investment property that matches your search criteria.
References
- https://www.wkyt.com/2021/08/13/new-census-data-shows-kentuckys-population-saw-nearly-4-growth/
- https://worldpopulationreview.com/us-cities/lexington-ky-population
- https://www.commercelexington.com/demographics.html
- https://www.bls.gov/eag/eag.ky_lexington_msa.htm
- https://fred.stlouisfed.org/series/NGMP30460
- https://locateinlexington.com/data-facts-and-figures/why-lexington/high-quality-of-life/
- https://news.locateinlexington.com/2017/06/lexingtons-target-industries/
- https://locateinlexington.com/data-facts-and-figures/major-employers/
- https://www.lbar.com/
- https://www.lbar.com/news/2021/10/27/main/real-estate-sales-exceed-3-billion-for-the-year/?subMenu=NewsEvents
- https://www.zillow.com/lexington-ky/home-values/
- https://www.realtor.com/realestateandhomes-search/Lexington_KY/overview
- https://foxlexington.com/news/local/buying-vs-renting-in-2022-neither-is-easy/
- https://www.wkyt.com/2021/06/03/wkyt-investigates-hot-housing-market/
- https://www.rentcafe.com/average-rent-market-trends/us/ky/lexington/
- https://www.zumper.com/rent-research/lexington-ky
- https://www.zumper.com/rent-research/lexington-ky
- http://www.freddiemac.com/research/indices/house-price-index.page
- https://kentucky.hometownlocator.com/ky/fayette/lexington-fayette.cfm
- https://www.niche.com/places-to-live/lexington-fayette-ky/
- https://www.bestplaces.net/cost_of_living/city/kentucky/lexington-fayette
- https://realestate.usnews.com/places/kentucky/lexington-fayette
- https://locateinlexington.com/data-facts-and-figures/why-lexington/high-quality-of-life/
- https://www.usnews.com/best-colleges/ky
- https://www.kentucky.com/news/state/kentucky/article244541817.html
