Summer is officially here and the Ohio real estate market is hot! The big news that everyone is talking about is how quickly homes are selling right now. In fact, May 2021 saw the lowest days on market on record - 14.
Last week's market analysis by the Columbus Board of Realtors points out the stark contrast of today's market versus that of just 10 years ago, stating that "Ten years ago, there were 17,603 homes for sale – 8.5 times more than today, and yet home sales today are 50 percent higher. Market shares have also changed significantly over the last decade. In May 2011, homes under $350,000 accounted for 93.5 percent of the homes sold and it took an average of 109 days to sell. Last month, homes in that price range totaled 2,054, or 68.4 percent of the sales, and they sold in an average of 11 days!"
Another interesting trend we're seeing is the shift back to urban markets. If 2020 was the year of the suburbs, where everyone was fleeing cities for what the Dixie Chicks called "wide open spaces", then perhaps 2021 is the year of the urban center. It may be too soon to make that call yet, but things seem to be moving in that direction. The fastest growing communities last month were German Village, Clintonville, and Worthington - while not the most urban parts of Ohio, they definitely fall in the "urban quadrant". Contrast this to the bottom performers which included Lancaster, West Jefferson, Hilliard, and (to throw a wrench in things) Downtown Columbus, the area bordered by German Village to the south, Short North to the North, the Scioto River to the west, and I-71 to the east.
Despite all of this positive news, there are signs the market may be plateauing. The Federal Reserve recently announced an interest rate hike to curb fears of inflation, sending mortgage rates above 3% again. While rates are still unprecedentedly low, even a modest 0.25% increase in rates equates to a 3-4% increase in one's monthly payment. To put it differently, if rates move up 0.25%, someone who could once afford a $300,000 home can now only afford $290,000. It's hard to predict where interest rates will go in the future, but we suspect it's more likely than not that we'll see 4% again at some point in the next few years.
In other news, lumber prices are starting to go back to reasonable levels, which is helping construction costs that have been drastically inflated since last summer. Over the past few years, lumber prices floated around in the $300-500 range, but after COVID-19 triggered major shortages in the supply chain, prices shot up 400% peaking near $1,700 in May 2021. Over the past 6 weeks, prices have dropped about 60% and are lingering in the high-$700s. This drop will make new construction more affordable, and could put pressure on the existing home market, though the price impact likely won't be felt until 2022.