Happy October Central Ohio! The Autumn real estate season is officially upon us, and as mortgage interest rates approach 7%, we're really starting to see a serious shift in the housing market. However, the shift, at least thus far, isn't as extreme as many were expecting.
There are some excellent insights we can garner from comparing housing stats from September 2022 to September 2021. Most strikingly, the number of homes sold decreased by 20%, an ominous sign that things are slowing down quickly. The number of homes in contract decreased even more, down 24% to LY. This is generally a leading indicator of what's to come in October and beyond.
Days on market, the measure of how long it takes to sell a home, increased by 29% to 18 days - relatively low by historical standards, by much higher than our peak of 11 in June/July 2021.
As for housing prices, things are much more stable. Average home prices in Central Ohio increased by 10% year-over-year to $331,287. The average price per square foot increased by slightly more (+11%) to $186. The comparative increase in price per square foot is a sign that buyers are opting for smaller homes, possibly due to affordability reasons, although there are design trends that can play a role here as well. But even though prices are still up significantly over this time last year, we've still experienced a dip from the Spring peaks where average home prices reached $353k and price per square foot reached $192. Real estate, after all, is seasonal, but seasonality accounts for only about half of this dip. The other half is driven by rising interest rates. The chart below highlights this seasonality over the past decade.
Despite the dip, sellers are still optimistic. In September, the median list price was nearly 16% higher than in September 2021. However, there's definitely some dissonance between optimistic sellers and realistic buyers. The sale-to-list price ratio - or the percent above/below asking price sellers are getting on their homes - tells it all. This peaked in April 2022 when the average home sold for 4.9% over asking price. Last month, the average home sold for 1.4% below asking price. Despite many sellers' hopes, it seems the days of multiple offers above list are over for the time being.
The question now remains, is this the beginning of the next big crash or just a slight correction? It's difficult to answer this question as it really depends on macroeconomic conditions such as inflation and the Federal Reserve's monetary policy. As of October 19, 2022, both of these are showing no signs of slowing down, which likely means the housing market will continue this trajectory indefinitely. With that in mind, we still have a housing shortage in Columbus, and as Econ 101 taught us, supply and demand drive everything. I, therefore, tend to believe low housing supply will prevent the floor from falling out from under us. Also, keep in mind higher interest rates slow down new development so the supply shortage certainly won't be corrected overnight.
If you have any questions about economics or real estate, or if you’re just looking to save money in commissions when selling your home, please don’t hesitate to reach out. Until next time, stay classy Columbus.