Home Prices Set Records Ahead of Spring Buying

Spring may have sprung early in the housing market. The U.S. median list price set a record high of $392,000 in February, according to Realtor.com®’s Monthly Housing Trends Report. Many markets continued to post double-digit annual price gains, led by Las Vegas, Miami, and Tampa, Fla., with annual increases of at least 31% each (home prices in Central Ohio posted year-over-year gains of 12.1% on average across all markets).

Over the last five years, we have seen home prices break records early in the season as buyers try to get ahead of the competition. But this is the first time the record has been broken in February, signaling that competition is already heating up weeks before the start of the spring buying season in a typical year.

The number of homes for sale remains at record lows. But home buyer demand remains high and home prices are surging as a result of competition for low housing inventories. Slight improvements have been made on the inventory front: February saw declines in new listings improve for the first time since November 2021. Whether inventory continues to improve will depend on a variety of economic and geopolitical factors, including the conflict in Ukraine and mortgage rate hikes, which haven’t impacted home sales or price growth so far, but will increasingly lessen buyers’ purchasing power.

The U.S. is Drastically Short on Housing

Inventory and a shortage of housing in the U.S. remains the key issue. As consumers look to buy homes, the pace of homebuilding has not kept up with supply. The U.S. was short 3.8 million units by the end of 2020, according to Sam Khater, the chief economist at Freddie Mac, and this deficit of units had increased 50% from 2018. Add to that a surge in investors purchasing single-family homes to serve as rentals, further limiting supply, and a generation of Boomers who are choosing to age in place rather than sell their homes, and you have the perfect storm for a housing shortage.

More than two in three metro areas saw median home prices increase at least 10% in the last three months of 2021 from the previous quarter, according to data from the National Association of Realtors. Over the past year, the median single-family home price rose 15%. Median earnings, by contrast, were up just 2.6% from a year before, even as consumer prices for goods like gas and food continued to climb.

Mortgage Interest Rates Headed Up

The Federal Reserve interest rate policy contributed to a steady decline in mortgage rates during the pandemic with the average 30-year mortgage rate hitting a low of 2.65% in Jan. 2021. Since then, the average mortgage rate has climbed to 4.58% as of Mar. 15 — surpassing rates prior to the first shutdowns and hitting a 23-month high. And it’s not looking like they will slow down as several Federal Reserve members have stated they are predicting three interest rate hikes to fight back against inflation rates not seen in over 40 years. However, no finite decisions have been made as of yet.

Rising interest rates has buyers scambling to find a home to lock in today’s rates before they rise further. Higher mortgage rates decrease affordability for anyone taking out a mortgage, which the majority of home buyers do.

While some home buyers — particularly first-time buyers — may be considering waiting until even higher rates help cool off prices later in the year. (The largest share of home buyers are millennials ages 21 to 40, many of whom are first-time buyers, according to the National Association of Realtors.)

The pace of housing price increases may slow from double- to single-digit percentages this year, but prices are still expected to go up, and conditions will continue to favor sellers in the majority of U.S. housing markets, including right here in Central Ohio.

Affordability Remains High in Central Ohio

Columbus is forecasted to be the 5th hottest housing market in 2022. Central Ohio asking prices and transaction volumes are predicted to be double the national average, with demand for homes remaining elevated due to relative affordability, immigration to the area, as well as the high concentration of millennials and strong job growth. 

Attom Data Solutions recently released their Home Affordability Report which revealed that in 77% of US counties, a median-priced single-family home was less affordable in the fourth quarter when compared to historical averages.

A property is deemed affordable if the average wage earner spends less than 28% of their income on housing payments (assuming 20% down payment on their mortgage).

Despite rising home values and higher mortgage rates, Columbus and the State of Ohio remain among the most affordable places to buy a home.

On average, a homeowner in Franklin County spends just 21.8% of their income on their mortgage payments.

According to Sperling’s Best Places, Columbus’s cost of living index is 84, in comparison to the national average of 100. Groceries, utilities, transportation and health costs are all cheaper in Columbus, making its residents salaries stretch much further than in other cities.

Central Ohio has so much to offer, from arts and entertainment to parks and recreation. Columbus a great place to live, work, raise a family and buy a home, and it’s no surprise that more and more folks want to live here!

If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please give us a call and we’d be happy to assist you! While mortgages rates and Central Ohio home prices will continue to rise, Columbus remains a highly affordable, and desirable market.

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235

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