There are really 3 things to focus on in today’s market. Those three things are Interest Rates, Inventory and Home Prices. Everything else rises and falls on those three metrics in most markets and in this market there is an argument to be made that everything rises and falls on one thing…. Interest Rates.
We can go ahead and start there. Interest rates have gone from 8% down to 7.35% over the last 30 days. This has been largely due to a lower than expected (added) Jobs Report and a lower than expected Inflation number (both month over month and year over year). This happened at the same time last year and started a trend that led to much lower rates, if that happens this year, expect demand to pick up just like it did last year after the first of the year if this trend holds. Interest rates have been the driver of the real estate market and just this small drop in a seasonally slow time of year has led to an increase (albeit a very small one) in buyer activity.
Inventory remains at historically low levels, but due to an increase both locally here in Central Ohio as well as nationally, we are seeing overall inventory levels coming in above last year, despite the overall environment being very similar. This could be a signal that we have finally seen the end of the low inventory environment that has plagued the real estate market and led to crazy high prices along with the bidding wars, etc. That being said, this is the very beginning and not the guarantee of anything!
Pricing is the thing that so many have been predicting will fall and it continues to be stubbornly high despite the interest rates, which has led to very low affordability. That being said, the average sales price in October was more than 5% more than last October and the same trend is in place so far in November this year.
Thank you for continuing to support Marsh Home Group, we appreciate all of you for your continued support and remain grateful for all that you have done to contribute to our success over the years. We look forward to what is to come over the upcoming years!
When I look at the overall health of the market for buyers, sellers and investors I look at 3 main components: Affordability, Supply/Demand and Future Demand Expectations. In today’s market update I’m going to use each of these (which all impact each other) to explain why I think now is a great time to buy in Columbus and for some that means that now is the time you should be selling as well.
Affordability
Affordability is at record lows right now. Nationally it’s at places we haven’t seen since the early 80’s when interest rates were over 12%. The same holds true in Columbus and Central Ohio, the average income nationally has to spend almost 40% of GROSS (not your paycheck) on their mortgage payment to buy the “average home”.
This means that many people are priced out of the market. In order to increase affordability, builders are subsidizing interest rates and many sellers are willing to do the same especially if they aren’t selling immediately.
The two fastest ways to get affordability back into line is through decreased mortgage rates or dropping prices. Neither of which are guaranteed in the foreseeable future.
Supply and Demand
Supply – Inventory (the number of homes currently available to purchase), has remained close to all time lows and has been for most of the year. This continued to be driven by homeowners who don’t want to sell their 3% or 4% interest rate and buy a home at a higher price with an interest rate close to 8%. This is keeping inventory off the market and supply low.
Courtesy of Trendgraphix
Demand – We typically measure demand by the number of homes we have in contract. That has been a less reliable indicator during the pandemic because the in contract numbers have been kept artificially low by the historically low inventory. The best way I’ve seen to measure demand other than boots on the ground/antidotal evidence is through national mortgage applications. We can see below that the purchase loan index is even lower than it ever got during the Great Recession, yet prices remain stable to due such a low supply.
When decided to purchase or sell a home in today’s market you have to look at where you think the housing market is going and where the economy is going in the area that you are purchasing. With businesses moving to Columbus regularly as well as major projects with Intel, Microsoft, Google, Amazon and more, Columbus continues to present a large growth opportunity. Below is a graph from MORPC (Mid Ohio Regional Planning Commission) forecasting the population to grow by 726,000 residents in the next 26 yrs which would bring the total population to over 3.1 million. They have to have somewhere to live.
With very positive long term growth potential, Columbus is poised to continue growing. Despite a tough few years during the great recession, the Columbus real estate market has come roaring back and far surpassed all expectations. That was before Intel and the other major projects announced their intentions to come to town. With those projects having already begun and new companies announcing relocation here regularly the experts expect the Columbus population to grow pretty significantly (as shown above).
We believe that the current market represents an opportunity to buy without competition that may not present itself again for a while once mortgage interest rates level off. We saw the same phenomenon happen last fall when purchases slowed due to higher rates and then following a drop in rates, the frenzy re-ignited and caused more multiple offer situations and further increased prices. Even with lower demand on the sell side, it is typically offset by the fact that most buyers are moving up in price point when they buy, ironically enough, even downsizing buyers.
That recommendation comes with two caveats:
You plan to live there for 3-5+ yrs
We believe that if you see yourself living in a home or owning a home (investor) for more than 3 yrs that an investment in Central Ohio Real Estate is a smart one today. If you plan to keep it for 5+ years it’s an even better bet in our opinion. If you plan to own for a year or two, it could be a good time to consider renting or buying a fixer upper that you can add immediate equity to.
2. You can comfortably afford today’s monthly payment or the fully adjusted ARM monthly payment
We think that long term rates will likely come down over the next 1-2 yrs and possibly significantly. If/when that happens a refinance could represent a great opportunity to have locked in today’s pricing, but improve your monthly/annual financial position with a lower rate. We don’t recommend stretching yourself thin or betting that rates will for sure lower in the next 1-2 yrs unless you are fully prepared to pay whatever the current or future adjusted rate would be if you choose an Adjustable Rate Mortgage (ARM).
We specialize in helping people navigate the market of the moment, reach out to us and let us know how we can help you through your current situation!
Thanks for joining me down below here! Feel free to turn on my market video above and listen or dig a little deeper here with me on the stats! I want to dig into a couple key indicators of today’s market and how they may effect you if you are thinking about buying, selling or investing in real estate.
Highlights in the Market
Active Listings are DOWN just under 10% compared to the same time last year (-9.9%)
New Listings are DOWN just under 1.5% compared to the same time last year (-1.4%)
SOLD Properties are relatively flat UP 1% compared to the same time last year (+1%)
Under Contract/Pending Properties are UP 30% compared to same time last year (+30.1%)
Interest Rates are UP from 1/8% to 1/4% compared to 1 yr ago (+0.18 to +0.27% on 30 yr fixed) … (From 3% one year ago to 3.18% today and they were 3.27% last week)
So what does all of this actually mean to you? Below I will break down what it means to you if you are a buyer, seller or investor in the market.
Buyers
The relatively stable buyer demand with the seasonal drop in new listings has created movement back to a tighter inventory environment. Although the days of 20 offers from spring and summer are gone, 5 or 6 strong offers creates enough competition to continue driving prices up. We have seen the strongest demand in the sub $500k price range in suburban school districts.
The interest rates continue to be at historic lows, however, buyers who sat on the sidelines “waiting for the crash” might be surprised at what there payment will be now, especially if we see the Federal Reserve begin to pull back on their purchasing of mortgaged backed securities, which has kept rates arbitrarily low for the last couple of years. They have said they may start pulling back on that as soon as November, so we will wait to see what effect that has on rates. Certainly buying power is affected when rates rise, which will either slow demand or cause the lower price ranges to become even more competitive.
Sellers
The current environment continues to be the strongest in years, if not ever for most sellers. The extremely low inventory packaged with stable buyer demand has continued to create competitive offer environments for sellers who have priced their home appropriately. We have seen the rate of appreciation slow a bit as some areas have bumped into pricing ceilings, especially when pricing in traditionally lower priced areas begins to bang up against that $400-$500k range. We continue to see very strong demand in suburban and rural school districts which were experiencing less growth compared with urban areas Pre-Covid.
Investors
The investor market in Central Ohio remains very tight. With very little foreclosure activity, the bulk of “off market” buying has happened through direct prospecting by investors. This has led to less hitting the actual market. When something does hit the market there are often multiple offers. A lot of the demand in multi family real estate in particular has been compounded by interest in our market from cities on the “coasts” whose average sales prices are significantly higher. Columbus metro has a very attractive average sales price as well as very strong rents for the price. The combination of those two factors makes our market very attractive for investors from out of the area. I average one to two inquires from investors (often from California) who have never been to Columbus, but are interested in purchasing here, either in the form of long term rentals or in “flips”. If prices continue to rise for multi-family properties and rents don’t rise at the same pace, I expect demand to decrease some, especially from out of state investors. Other lower priced markets which are in a similar place that we were in 5 or so years ago will start to grab the attention of the bargain hunters from the coasts. Until that shows up in the numbers, we will continue to see strong demand from outside the market.
Thank you for checking out my latest post, please follow us for more information. If you would like to have a quick chat about the market or get a market analysis for your particular home or investment area, don’t hesitate to reach out!
With google searches for “is the real estate bubble about to burst?” topping the search charts, all the ocnversation around real estate has been, how long can this last?! Below are both my short video (for those of you with no patience 😉 and my long video that goes into more depth and detail of the Central Ohio housing market through July 2021.
The way that I chose to demonstrate where we really are from a “facts” perspective is through the “months of inventory” stat. This is how the industry as a whole measures the “supply vs demand” in the current market. The basic equation is this:
Current Active Homes and Condos on the Market / Total Closed Units last month = Months of Inventory
To put this graph into perspective, the industry standard is that anything under 4 months is a Sellers Market, between 4 and 6 months is a Balanced Market and more than 6 months is a Buyers market.
As I always say, real estate is local, so if you are interested in what is happening in your city or even your neighborhood specifically, I’m happy to do a personal analysis for you! Just shoot me a quick text or email!
Troy
614-325-8394 or troy@marshhomegroup.com
In Depth Analysis – Central Ohio Real Estate – July 2021
Phew…. This market is crazy! Having been in real estate for 17+ years this is the craziest market I’ve seen, so I went to talk to my colleagues for 40+ years and asked, “Have you ever seen anything like this? ” The answer has consistently been a resounding, “NO!”. As you can guess, the market hasn’t slowed down. Have we had some more much needed listings come on the market? Yes we have. Has that solved our inventory issue? NO!
As you can see above, the new listings rose by 22.5% compared to the first 2 weeks of June 2020. That was followed by an increase of 27% increase in the pending listings. So we should continue to expect the sold homes to increase year over year. This is all happening in addition to an explosion of new build sales that typically don’t show up in these numbers.
Overall, my long term outlook is very strong for Columbus. With an increasing population (the forecast is for that trend to continue), a group of young people who have rented longer than average and are now wanting to buy and what I like to call the “divorce effect” there is no end in site to increasing demand here in Central Ohio. Next month I will explain the divorce effect as well as one of the reasons why we are so tight on inventory here in Central Ohio.
Thank you for reading! We are so grateful for you! I’m always happy to jump on a call or do a quick loom video to update you on the value of your home or what is happening in your neighborhood. If you aren’t already receiving my monthly market update for your neighborhood, let me know and I will get you set up!
Each month we have been talking about inventory (or lack thereof). We have talked about both the reasons behind it and whether we think it will continue. We haven’t however talked as much about the effects of that in the long term on both your current investment as well as future investments. The numbers were formally released for October and we saw staggering numbers…
What jumps off the page in these numbers is October 2020 compared to October 2019 in both Average and Median Sales price. To see prices jumpy by 15 and 17 percent respectively compared to one year ago is unprecedented. This has been driven by the low inventory and affordable interest rates. These two things combine to produce an affordability that despite the higher prices, buyers continue to seek out new housing options.
With interest rates back at the bottom (near historic lows) as well as the limited inventory (down 44.8% year over year – see below) there seems to be no end in sight to the current market.
The indicators above are driving YTD sales towards records in terms of units and volume of homes sold. We are now almost 3% higher in closed sales than on this same date last year and for the most part this is not including new build sales which are also up substantially (many are not listed or recorded in the MLS and therefore are not included in these numbers).
What does this mean for You?
Experts across the industry as well as our opinion here at Marsh Home Group believe that the pandemic which has forced people to spend more time in their house and also spend less due to eating at restaurants less, traveling less and overall doing less will continue to drive more sales in 2021. Interest rates will also continue to play a positive roll in the housing market, government guidance as well as further promised stimulus promises to keep interest rates around historic lows despite gains in the stock market. The extremely low interest rates have allowed for the appreciation to go almost unnoticed in people’s monthly payments. The major thing everyone will be on the lookout for is rising rates at some point in the future, however, at this point that isn’t expected in 2021.Experts expect interest rates to stay low and activity and rising prices to continue into 2021.
What are your real estate goals for 2021?
We here at Marsh Home Group pride ourselves in a consultative approach to real estate selling and purchasing. Whether you have a question about the market or you want to know how to improve your home for an expected sale is 2021 or beyond, we are always willing to help.
Give us a call at 614-750-2144 to discuss your real estate goals for 2021 and beyond!
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