Real Estate is Local. Remember That.

Real Estate is Local. Remember That.
As portrayed in the national news, you would think the real estate market is in dire straits. Here in central Ohio – indeed, in the Midwest overall – it is still a seller’s market. We’ll take a look at factors affecting the local market:

Interest Rates

The recent increase in mortgage interest rates – from about 3% to just under 7% - has made housing more expensive. For a $300,000 purchase with 20% down and conventional financing, the mortgage payment is about $590/month higher. Interest rates are projected to continue to rise – although probably not nearly the rate that it has over the recent period. Remember that the Federal Funds Rate that is managed by the Federal Reserve does not directly affect mortgage rates. Inflation and the Fed’s actions to blunt inflation are causing uncertainty in the financial markets, and that uncertainty about the future is what is driving rates upward. Mortgage rates are determined by the financial market, and mortgage rates move in lockstep with the 10-year Treasury rate. The financial markets see inflation as a major source of uncertainty about the future. Remember, too, that the media thrives on fear and uncertainty, and tend to present information in a way that amplifies.

Midwest Affordability

Housing in the Midwest is much more affordable when compared to other parts of the United States. Homeowners here typically spend a much smaller portion of their income on housing, instead spending on other things – eating out, consumer goods, expensive toys, exotic yard equipment. When interest rates rise dramatically as they have, I see most buyers in this market pause, recalibrate, and then continue to look – most often in the same price range as before the interest rate increase. Buyers here just plan on spending less on consumption, and more on housing.

Home Prices

Historically, real estate values have continued to rise through recessions in all but the recession of 2008 which was led by real estate. There continues to be a shortage of supply and consistent demand. Buyers no longer tied to a physical workplace are migrating from the coasts to the Midwest in search of smaller-town environments. They are coming from markets where real estate values are often many times higher than they are here. They are less price-sensitive and many are used to paying a higher portion of their income for housing. In the news, more in the Midwest, is that sellers are reducing their asking prices. Sellers had been emboldened by the superheated market to price very aggressively; buyers are now often not willing to ‘take the bait’, and the seller has to adjust the list price to what is still a good price, just not so aggressive.


Fewer homeowners are selling! The media only talks about the ‘depressed market,’ implying that it’s a problem with fewer buyers or with home prices too high. Empty nesters have few options to go to here in Central Licking County. Few condos are being built, and many condo owners are staying put. If a homeowner is considering a horizontal move (to a home of similar value), they’re looking at a higher interest rate for a similar loan, and so there are fewer horizontal movements. Relatively few homes have been built since the 2008 recession, while the number of potential buyers has increased. Central Ohio still is not building enough homes to keep up with current demand – let alone catching up.


With supply chain issues and high prices for lumber and other building materials, homebuilding has become riskier for the builder. It is difficult for any builder – even the production builders who are buying lumber by the trainload – to build a home for less than about $300,000. Local builders here in central Licking County are building higher-end homes priced $400,000 to $800,000. There is a market for homes in that price range, and the builder has potential for a higher profit margin. Many local builders and people in the trades left the business in the 2008 recession, and so there are fewer builders and subcontractors. The day of electricians and plumbers making six-figure incomes is not far away, if not here already.


Buyers are clearly spooked by the continual refrain in the news about inflation, recession, and the ‘troubled’ real estate market. This creates uncertainty about the future; purchasing a home with a mortgage as most buyers do is clearly a bet on the future. So while buyers can afford to buy in this market, their optimism is tempered, and their enthusiasm is dampened a bit.


The US economy remains robust, only slightly responding to the braking effect of higher interest rates. If enough people are convinced that a recession is forthcoming, it can become a self-fulfilling prophecy.


No discussion about real estate here can leave out Intel! In the current market, land speculation in Licking County is astounding; here are many commercial regional/national investors and developers looking to participate in this market now changed by Intel’s arrival. The real estate market for existing homes will not be affected for another year or two – once workers are anticipating staffing the plant which is projected to open in 2025.

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