Saturday, September 15, 2007

Columbus Ohio Home Inventory

As a follow up to yesterday's blog, I have decided to analyze the home inventory among several Central Ohio areas as well as Franklin and Delaware Counties as a whole. If someone would like information about an area of Central Ohio I did not list among the statistics, feel free to let me know and I will work the numbers!

First off, I will throw the graph at you and then discuss how I interpret the data and what seems to stick out as interesting. The statistics are from August 1, 2007 to August 31, 2007 and were retrieved by myself from the Columbus Board Of Realtors.

Please click the below graphs in order to view them at full size

Columbus Ohio Real Estate Home Inventory Stats August 2007

Columbus Ohio Real Estate Home Inventory Stats By County August 2007
So, you may be asking what in the world does this information mean? Well to be honest, I thought prior to doing the research, the statistics would produce more meaningful results, but who is to know before going in, right?

First, a little background on some terms. The "contingent" sale statistics I used in the research were based on "Contingent upon Financing & Inspection" clauses only. More likely than not homes in this category make it to closing and the home actually sells. Certainly, this is not always the case, as buyers and sellers often negotiate over the remedy solutions to a home inspection, and the more rare occassion (in my experience with clients) a person is not able to get a loan. I did not take into consideration homes listed as "Contingent upon the sale of another home" or similar clauses for a couple reasons. First, the time it takes for these homes to close is usually quite a long time longer than a standard closing. In addition, many of the homes contingent on the sale of another home do not make it to closing. I believe adding this into my research would skew the results, so I decided it would not be included.

The term "Under Contract" simply means the home has passed all inspections, all clauses have been removed, and the home is set to go to closing. This is a more dependable indication a home will actually sell.

My take on the statistics involves looking at the percentage of homes sold in August compared to the number of current homes for sale on the market. Sure, there is a flaw to this method, as it only takes in consideration the percentage for the month of August, but it still should give more than just a "general idea." The numbers of homes sold per month changes quite drastically depending on the month in Central Ohio - under normal circumstances, the "hot" months for selling a home are May, June, July, and August. Naturally, when the kids are out of school. Following the end of August, there is typically a four to six week period where things tend to dry up, then back to normal again. Not normal as in the months of May to August, but a noticeable increase from September.

Once I calculated the percentage of homes sold in relation to the current homes on the market, I determined the number of months needed to exhaust the current inventory - assuming the August percentage remained constant. This revealed some significant differences in the local communities as well as at the county level.

Powell, which under this study includes properties located within the Village of Powell seems to have had a tough month in August. Only 9% of the current listings sold. At that rate it would take a whopping 11 months to rid the inventory, not to mention the new listings sure to be added.
Worthington and Hilliard had good ratios, selling over 20 percent of their inventory, Worthington with a whopping 25.74% of its inventory.

The price of the home sales for the particular area were also interesting in comparison to the average listing price of the homes for sale. Please see the graph below and click to enlarge.

Columbus Ohio Real Estate Home Sales August 2007
In my opinion, this shows some of the most troublesome data. The average price of the homes selling are significantly less than the average price of the homes currently on the market. A few things popped in my mind. People seem to be searching for bargains (no big surprise there!), the affluent buyer seems to be waiting things out before purchasing or they are not currently interested in purchasing a home, and current listing prices in many neighborhoods appear to be overpriced. The homes selling are the lower priced homes in each area. Once again, no big shocker. I suspect in the relatively near future, sellers will be dropping their listing prices quite a bit. At least those who have had their home on the market for quite some time.

The foreclosure sales have had a downward force on values because REO properties are a greater percentage than ever before. This has caused buyers to flock to these "bargain" properties. The homes that are selling are those under foreclosure/short sale or homes are forced to compete with them by lowering their price. In the past foreclosure sales were such a small segment of the market, it was not a driving force in the market, not causing values to be influenced or very little. However, in today's market, the percentage of short sales & foreclosures is at such a high rate, it is effecting all properties in order to compete.

The average home for sale within the Dublin city limits in August was $435,391. The average price of the homes sold in Dublin during August was $316,256 - only 72.64% of price of the homes currently on the market or a whopping $119,135 difference! Quite an astounding figure. The buyers in Dublin have been purchasing the lower priced homes, perhaps because they feel others are over-valued and perhaps (and this is a stretch) people with school age children were rushing to get into the Dublin School System during the month of August prior to the beginning of the school year. There are many homes in the $150,000 to $200,000 price range within Dublin Schools. The interesting fact is most of these are not located within the Dublin City Limits - they are in the City Of Columbus. The research I conducted only considered homes within the City of Dublin. So, the rushing in to take advantage of Dublin Schools in affordable housing was not the case.

Delaware County and New Albany faced similar circumstances in August. Dublin, New Albany, Delaware County, and Powell were the four areas having average listing prices over $300,000. Interestingly, Dublin, New Albany, and Delaware County (which includes Powell) were the areas facing the largest difference between the average selling price and average price of homes for sale. Delaware County's figures were not quite as drastic as Dublin, but still not typical for Central Ohio. The 77.05% (Average Selling Price/Average Current Listing Price) of Delaware County was the second lowest percentage, while New Albany faced the third lowest at 84.43%.

Central Ohio home buyers apparently are holding off purchasing some of the higher tier properties, while the more aggressive market has been in the more medium range market. In order to get their homes sold quickly, it seems a lot of sellers are in need of a price reduction in the Dublin, New Albany, and Delaware County areas.

The other areas I researched were actually not very far out of line with "normal" figures for local real estate. The average home in the Central Ohio area typically sells for approximately 95 to 97% of the listing price. Please realize this does not take into consideration the initial asking price of a home. Without a doubt, those numbers would drop slightly if calculated into the equation. Anything in the high 80's to 90% range, I would consider moving along pretty good in today's market. Powell, Hilliard, Worthington, Westerville, and the entire Franklin County (barely) fit my belief. Being a buyer's market, many home buyers are coming in with low offers and sellers are negotiating more than normal for our market area. This is not to say sellers are giving away properties. The average home sale has not decreased dramatically in Central Ohio, but there is certainly more competition to get a home sold, creating longer periods of time on the market.
Below are the statistics by area with respect to the average home sale price in August 2007 in comparison to the average current home listing price (as mentioned above).
  • Dublin - 72.64%
  • Powell - 93.65%
  • Hilliard - 92.04%
  • Worthington - 88.75%
  • Westerville - 91.28%
  • New Albany - 84.43%
  • Franklin County - 86.50%
  • Delaware County - 77.05%

Friday, September 14, 2007

Central Ohio Housing Market Bubble?

The media in today's world seems to take things and not only dwell on them, but take them out of proportion, create "talking points", and will use nearly anything to create drama and viewers. Without question 2007 has not been as successful nationwide as the preceding years of this century. However, the media goes overboard by painting the real estate market as "doomed" and in the middle of the bubble bursting. This may be the case in certain geographical areas, such as Las Vegas, Florida, California, and along much of the coast, however it is difficult to determine if there ever was a bubble in the first place in Central Ohio.

I have taken statistics from our local Columbus Board of Realtors home sales from the years 1995 to 2007 and conducted a study to determine if there actually was a "bubble" in home prices in Central Ohio. There has certainly been a good deal of appreciation, but has that "appreciation" been greater in the years from 2001 to 2006 (widely recognized as the housing boom) compared to 1995-2000? The statistics say without a doubt no.

My study involves two different levels - the first being some of the more prominent school districts in the Central Ohio area and the other was the entire Columbus Board Of Realtors MLS system. Please take into consideration the study and statistics do not take into consideration homes sold by their owner and some new construction homes (as many new builds are built specifically for a particular client and are not placed in the Columbus MLS System). Regardless, the statistics have a significant number of homes to determine accurate statistics as the entire MLS system had 26,377 home sales in 2006!

At the school district level it was apparent the greater amount of growth and appreciation was realized in the 1995-2000 time frame. While the 2001-2006 numbers did show appreciation, it was recognizably less.

The average appreciation for the 16 school districts analyzed during the period of 1995 to 2000 was 27.20% over the six year period, or 4.53% per year. The time frame of 2001 to 2006, argued by many as the bubble growing and getting ready to burst saw an appreciation of 19.99% or an average of 3.33% over the 6 years.
I decided to take another approach and analyze the entire Columbus MLS system for the same time period. The Columbus MLS covers 14 different counties (Franklin, Delaware, Union, Licking, Madison, Hocking, Ross, Logan, Morrow, Marion, Fayette, Pickaway, Clark, Knox Counties) and offers a wider approach to determining if there was a "housing bubble" in the Central Ohio Real Estate market. In 2006 there were 26,377 homes that sold in the MLS!
Click Above to View Details or Click To View PDF Here
The figures closed any idea in my mind there was a "housing bubble" in the Central Ohio area from 2001-2006. The numbers verified the previous study of individual school districts. For the time period of 1995 to 2000 the average Central Ohio home increased 25.61%, or an average of 4.27% each year over the six years. Meanwhile, the 2001-2006 time frame produced significantly less appreciation - 13.99% over the 6 years or an average of 2.33% per year.

For those of you interested in the individual school district sales data, I have created a graph depicting the school district, average selling price, and year for the time period of 2000 to 2007 (as of September 15th).

Central Ohio Home Sale Statistics by School District From 2000 to 2007

Please Click the Graph Above To View Original Size or Click Here to View PDF File

Columbus Ohio Home Sale Statistics From 2000 to 2007 including the 1995 year with percent change and average home sale price

In my mind, there are two ways to look at this data. Central Ohio home owners have not realized the wide unsubstantiated "getting rich" growth as have many people in real estate markets across the United States this century. The Central Ohio area, on the other hand, realized a greater growth prior to the turn of the century and is a much more stable market than those of Las Vegas, Florida, California, and many others across the nation. There is an ease of mind knowing your are not going to see a drastic fluctuation in values. The typical Central Ohio home owner can sit back and for the most part expect an appreciation of 3-5% per year. Not much more and not much less. This is to the advantage of area sellers now, as they haven't seen the huge losses seen by many across the nation. Without a doubt, the Central Ohio market is down, but this area is not faced with the "doom" the national media projects across the television screens and newspapers across the United States on a regular basis.

Personally, I do not blame artificial prices and too high appreciation in values one bit for the area real estate slump. The prices are not necessarily out of line in Central Ohio, in fact, they are still quite affordable. The reason for the slight decrease in property value is two-fold.

First, I believe the media has created a nationwide fear among many home sellers and unsettled home buyers, wondering if now is the time to buy. The primary problem, however, is tied to the local builders and lenders. The builders could not build enough homes during the new construction boom this century. Builders were developing communities wherever they could obtain land, almost without regard of any other details. A few builders were building over a couple thousand homes a year. While the Central Ohio area offers many job opportunities and a lot of new buyers in the market, the new home market was bound to be saturated. People who bought new homes during this "housing boom" often were encouraged to use the builders "questionable" financing. The methods allowed nearly anyone to obtain a loan, regardless of credit history or income. The buy-down rates, adjustable mortgage rates, and property taxes increasing once the home was appraised at its full value are the primary reason for the housing slump.

For the most part, the builders did disclose what they were doing. Unfortunately, many people across the nation and Central Ohio either did not understand the terms and circumstances or wanted to live "high on the hog" for a few years. People now, realizing they are no longer able to afford their home with the increased property taxes or new mortgage rate are faced to either attempt to sell their home or allow it to go into foreclosure - the reason for the slight drop in property values, especially in certain areas. The foreclosures and trying to sell in desperation has caused the values to drop as well as make it more difficult for people who can afford their homes who have to sell to relocate or other circumstances.

Columbus Ohio Area July 2007 Home Sales

The July 2007 home sale statistics for the Central Ohio real estate market show a promising outlook, but still offers plenty of potential for good deals to Columbus Ohio home buyers.

These statistics show the number of homes up 5% from July of 2006 and more listings in contract than last year, but the value of the homes have decreased 0.8%, there are 6.6% more listings on the market, and the average home has spent 8.7% longer on the market.

As I dig deeper into the statistics I can reveal several areas that have been hit hard from the nationwide real estate downturn. Please click the following link for details of Central Ohio Home Sales by area from January 1, 2007 to July 31, 2007 compared to the same time frame in 2006.

Columbus Ohio Home Sales By Area January 1, 2007 to July 31, 2007 (Compared to 2006)

From this it is evident to see what area(s) have been hit the hardest from the housing slump. Of the notable areas, New Albany seems to stick out the most. There has been very similar activity in terms of number of homes sold - actually they were exactly 85 homes sold both in 2007 and 2006 through July. The interesting figure is the average home sale price - $610,834 this year compared to $716,232 - an astounding 14.7% drop from last year.

New Albany, wasn't the only area hit hard by the slump. Hilliard realized a 9.6% drop in average sales price, down to $200,345 from $221,686 in 2006. The number of homes sold in Hilliard was enough to gather a realistic statistic comparison as they numbered 278 so far this year while 2006 had 255 sell through July (a 9.0% increase). Perhaps buyers are taking advantage of the lower prices and deals as there are also 12.7% more homes in contract in the area compared to 2006. The price drop can likely be attributed to home owners being forced to sell their newer homes for a reduced price due to the number of foreclosures in the market and rate buy-down financing.

Welcome to my Columbus Ohio Real Estate Blog

My purpose for this real estate related blog is to give additional insight regarding the Central Ohio real estate market. Plans include frequent updates on local home sale statistics by area as well as local subdivisions. In addition, new construction information will be passed along from an insider's perspective as well as analyzing the emerging real estate trends in the market.

In this blog, you will find detailed information about the following areas in Central Ohio.

With my over 30 years of experience in Central Ohio real estate, I hope to provide you with some valuable information and helpful tips when it comes to buying, selling, or researching properties in the Columbus Ohio real estate market.

Please feel free to comment any blogs or ask any questions you may have about a particular blog or recommend a new blog topic.

Thank you and I hope you enjoy reading my blog!

Jim Fradd, CRP