While many areas of the economy have contracted, the housing market has stayed remarkably strong. But can the good news last?
When COVID-related shutdowns began last March, real estate brokers scrambled to respond to the shift and homeowners debated whether to put their house on the market. What followed was a period of unprecedented demand in Licking County and in the overall national real estate market, which ended the year with increasing average home prices and shrinking days on market.
You may be wondering whether the good times can continue to roll on. If you are a homeowner, should you take advantage of this opportunity? If you are a buyer, should you jump in and risk paying too much? Invariably when I get talking with someone, they ask whether I think this “seller’s market” will continue. This question is on a lot of people’s minds and I want to speak to it here. There are a number of fundamentals that have me optimistic about the short and long-term market in Licking County:
How is today’s market different from the one that caused the 2008 meltdown?
The conditions that led to 2008’s recession differed from those that triggered the current downturn. Now, the housing market is the source of much of the good news, especially here in Licking County. This time, banks are better funded, homeowners hold more equity, and economic activity is focused on financial factors outside the housing market. Indeed, Licking County and Central Ohio have done remarkably well through the COVID pandemic, continuing a strong trend. As industries pivoted to work-from-home, early fears of widespread job loss-related foreclosures have failed to materialize. Federal stimulus and the Paycheck Protection Program also helped to offset some of the worst early effects of the shutdown. Those most affected by COVID in job loss or reduced hours are retail and service workers, mostly in food/drink establishments.
The Licking County and central Ohio economies have been incredibly vigorous. With employment opportunities at all levels and low cost of living, Columbus and Licking County are attracting new hires. Populations are projected to increase 50% by 2050.
Are we facing a real estate bubble?
A real estate bubble can occur when there is a rapid and unjustified increase in housing prices, often triggered by speculation from investors. Because the bubble is (in a sense) filled with “hot air,” it pops – and a swift drop in value occurs. By contrast, the current rise in home prices is based on the predictable results of historically low interest rates and widespread low inventory.
Freddie Mac projects continuing low interest rates throughout 2021, aiding in economic recovery and increasing affordability. This increase in affordability puts upward pressure on home prices. Continuing low inventory should gradually ease as an aggressive vaccination rollout and continuing buyer demand drive more homeowners to move forward with long-delayed sales plans. Builders are jumping in, too, and while many custom builders are focusing on the $400,000 and up market, the big tract builders are selling homes in the high-$200,000’s and low-to-mid $300,000’s. The limitation in central Licking County is available land with public water & sewer for development.
Aren’t some markets and sectors looking particularly weak?
One of the big stories of 2020 was the exodus of young professionals and families to the larger square footage and wide-open spaces of suburban and rural markets. However, it appears that speculation about the demise of cities and the condo market was greatly exaggerated. The Columbus market is even more vigorous than the market here.
Renters have begun returning to major urban centers, attracted by the rise in available inventory and newly discounted rental rates. And buyers who were previously laser-focused on a single-family home are responding to tight inventory by taking a second look at condos. Projected national policy around housing promises to boost the real estate market in many cases. A proposed first-time homebuyer tax credit and investments in construction and refurbishment should help to increase affordability and bring eager new home buyers into the market.
Overall, according to most indicators, the real estate news looks overwhelmingly positive throughout the rest of 2021 and possibly beyond. Pent-up demand and consumer-driven policies, along with a continued low-interest-rate environment and rising inventory, should help homeowners hold on to their increased equity without throwing the market out of balance. In addition, the increase in long-term work-from-home policies promises to give a boost to a wide variety of markets, both now and in the years to come.
STILL HAVE QUESTIONS? LET ME HELP YOU WITH ANSWERS. CALL ME AT 740-587-2000.
While economic indicators and trends are national, real estate is local. I’m here to answer your questions and help you understand what’s happening in your neighborhood. Reach out to learn how these larger movements affect our local market and your home’s value.