Ohio Real Estate Update | May 2021
Good day fellow Ohioans! I truly hope everyone has been enjoying this beautiful weather and what seems to be some semblance of normalcy after the most tumultuous year in recent history.
In the world of real estate, we witnessed a 16.6% price increase over last April, which was the highest year over year growth of any single month on record.
One common, but inaccurate, explanation of this phenomenon is the idea that people are purchasing larger homes which are inherently more expensive. While this hypothesis sounds logical, it's not true - at least not in Ohio. To date (as of 5/22), the average home sold in 2021 is just 1,790 square feet, 12 square feet less than the same time period in 2020 (1,802 sq ft).
In reality, what's driving these unprecedented price increases is low inventory and low interest rates. However, the price of new homes also plays a role. It's well known by now that construction costs have skyrocketed due to supply constraints in lumber, concrete, and other materials. In addition, home remodels are on the rise creating extra demand in both supplies and labor (there's a reason why Lowes and Home Depot are reporting record earnings right now).
Another factor that has been gaining popularity from a recent study by the National Association of Home Builders, who claim that regulatory costs added an average of $93,870 to the price of new homes. While true, you have to read the entire report to fully understand the nuance. Many interpreted this claim to mean new government regulation caused home prices to increase by $93,870 - but the NAHB never says that. The report officially states that "on a dollar basis, applied to the current average price ($397,300) of a new home, regulation accounts for $93,870 of the final house price." In short, the average total cost of all regulations on a new home is $93,870, which includes $24,144 for building safety codes, $10,854 for "land dedicated to the government" (AKA parks and bike paths), and $6,256 for safe labor laws.
In other news, the average home is now selling in just 16 days, 46% faster than this time last year. But in spite of this continual trend of prices on the rise and DOM on the decline, we're finally starting to see a spike in new inventory. In fact, 3,619 new homes hit the market last month, a 33% increase over the previous April. Granted, last April was near the height of the COVID-19 shutdowns, but we're still trending in the right direction. Compared to new listings to April 2019, we're about on track, down just 2.5%.
For more information on real estate trends or to learn how you can save thousands of dollars in commissions, contact us today or visit our website commoncents.homes.