My Observations on the Columbus Ohio Real Estate Market

What I am seeing

1. Homes that are the best and priced right are selling in a frenzy of offers. (Remodeled kitchens/baths, pools, land, oubuildings, excellent locations are all still the rage)
2. Homes that are in average condition/need updating are seeing longer days on market, price reductions, lower showing activity, and are getting priced accordingly.
3. The affordability crisis is real but so is the inventory crisis. If there are 15 buyers looking at a house, expect a couple of them to be cash rich and be less/unaffected by increased rates (I know, its not fair). In a low inventory environment that cream of buyers at the top will keep a floor under prices. While demand has softened, its still very much a sellers market.

Bottom line: Most buyers aren’t willing to pay the market premium for “average” houses like they were from 2020-2022, in the face of 7% rates. Great homes are selling as high or higher than peak pricing. Average homes are selling close to peak pricing with a little more price differential to great homes than in the past.

Looking Forward

Expect a minor inflection point this Fall/Winter as sellers very hesitantly come to grips with the fact that their home will sell for a bigger discount than the remodeled home down the street and we see temporararily slim wider spread in value. Most sellers are equity rich and will resist, hence only leaving a small number of true value opportunities for select sellers with urgency, most sales will just be subtle concessions from peak pricing at extended “days on market”. If I were a cash investor focused on price and “ugly houses”, late in the year is when I would look to buy.

Rates might increase a little bit more toward the end of the year toward 7.5-8% and the amount of buyers will recede, as much due to normal seasonality we haven’t seen for a while, as much as rates. Cold weather and media negativity (over rates, commercial defaults, bank scares) will reward tone deaf value seeking buyers as reacreational buyers go into seasonal hibernation.

I don’t think we will see a notable(3+%) avg. drop in values, but this Fall/Winter may be the best time in the next 5 years for buyers to pay the lowest price. I don’t say this because I think prices will dip a lot, I say this because I think prices keep rising from here as rates temper over the next 3 years. Buyers buy payment. If/when rates get back to 5% expect all hell to break loose again, off to the races, and home values to be 10% higher. My assessment would be different if there were any indication there would be a catalyst to raise inventory, but there isn’t. Too little inventory and too much equity for meaningful distress.

My advice to Sellers: Get your home on the market soon, certainly before Thanksging if possible, or maybe wait for 24’.

My advice to Buyers: Thousands of buyers come out every year in March, fight amongst themselves for a few months, get frustrated, give up, then sign another lease. They think its like that all the time, its not. Your competition in the cold months is a small fraction of Spring/Summer. Fall/Winter is so much easier to buy a home.

Why rates won’t crash the market

The lower the payment goes, the more buyers come in to the market. Conversely, the higher rates go the less sellers come into the market. As rates increase, inventory will grow shallower, superceding any loss of buyer demand. Whatever happens to rates, the supply/demand imbalance will remain in the favor of sellers preventing any real price disintegration.

Expect rates to stabilize toward the end of the year and start to slowly lower into mid 2024. We are already close to fed inflation targets but the fed will over correct which will eventually prompt cutting. Only question is how long.

Right now

Some are mistaking this new found seasonality as a sign of a market correction. It is not. Updated homes are setting record pricing. The average home price as high as ever. We are simply seeing homes that rank lower on the desireability scale being re-valued accordingly.

In general: Instead of 5 buyers for every 1 house, we now might have 1-2 buyers for every house. Softened demand, but still imbalanced in favor of the sellers.

This past weekend I wrote offers totalling $1.7million, totalling $175k over list price, and have nothing to show for it. The best homes are still going gangbusters with multiple offers.

The lower inventory will keep this market propped up. (inventory is 50% of pre-pandemic levels)

• Great/remodeled homes will sell with multiple offers for as much as they ever have before, or a little more.
• Average homes won’t get multiple offers and may negotiate a little bit more than they would have in the Spring.

I take the time to write about what I am seeing in the Columbus real estate market every few weeks. This is NOT a templated marketing newsletter…it offers tips/tricks and observations you won’t see in your news feed.

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Thinking about Selling? Call or text Mike at 614-563-3822