Similar to other U.S. cities, the central Ohio housing market was hot in 2023. Columbus is a highly sought-after market, but last year it was more challenging than ever for first-time homebuyers.
In February 2023, the Mid-Ohio Regional Planning Commission announced that recent growth places Central Ohio among the fastest-growing large metropolitan areas in the country. By March, the region set a record for median sale price of homes. Housing inventory remained tight throughout the year, but there have been improvements in the Columbus region.
“We’re seeing a fascinating shift from the trends of 2023,” says Shannon Feick, owner of ASAP Properties based in Cincinnati, Ohio. While based in Cincinnati, Feick’s work and experience extend across Ohio. “The current market can be characterized by a delicate balance of supply and demand. This is being influenced by some local economic factors.”
Columbus is expected to be one of 2024’s hottest markets, according to Zillow, boasting solid economic fundamentals, relatively fast-moving inventory for sale, stable home values and plenty of demand from hopeful buyers.
To help give you a better picture of what’s happening in Columbus, we’ve compiled the latest information from the U.S. News Housing Market Index. Here’s what you should know about how the Columbus housing market has changed over the past year and expectations for 2024.
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How the Columbus Market Changed in 2023
The Columbus housing market saw several improvements in 2023. Columbus’ newly approved construction permits for single-family houses and multifamily housing (with two or more housing units) fared much better than originally forecasted, according to U.S. Census Bureau data.
Permit activity for single-family homes increased dramatically from 273 permits in January 2023 — the lowest since February 2019 — to 446 approved construction permits by September. Single-family permits reached the 2023 peak of 541 in August, a nearly 18% decrease month-over-month.
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There were around 643 multifamily housing permits issued in September 2023, much higher than the original forecast of 484 permits. At the beginning of 2023, there were around 558 permits for construction, which gradually decreased to 340 by May and shot back up to 692 in August.
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Because Central Ohio’s population
is expected to grow, housing permitting will need to increase twofold from recent numbers to meet the projected need of more than 100,000 new units in the next decade, according to a report commissioned by the Building Industry Association (BIA) of Central Ohio.
Columbus Housing Supply and Demand
Columbus’ housing supply is currently trending upward, but it’s still well below the six months that is considered a balanced market.Redfin reported there was 2.1 months’ worth of housing supply in September, up from from 1.9 months in September 2022, but down from 2.5 in January 2023. Nationally, there were 2.6 months of housing supply in September, which increased to 2.9 months by November.
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As more people move to the Columbus area, there could be a gradual rise in single-family construction permits to help increase supply in the coming months. Many homeowners are opting to stay in their homes because they’re locked into lower mortgage rates
and have fewer options to choose from.
Despite the slight uptick in mortgage rates at the start of 2024, the Mortgage Bankers Association noted that mortgage applications increased after adjusting for the holidays. As of Jan. 10, 2024, the MBA’s seasonally adjusted Purchase Index increased by 6%, compared with the prior week. Unadjusted, the Purchase Index increased 40% compared with the previous week — 16% lower than the same week one year ago.
In the rental market, 5.9% of rental units were vacant as of September, down from 6.4% at the beginning of 2023. Year-over-year, the rental vacancy rate was up by 2.2%, according to data from the U.S. Census Bureau.
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Consumer sentiment has improved, increasing from 64.9 in January 2023, to 67.9 by September, according to the Survey of Consumers from the University of Michigan. Consumer sentiment has been steadily going up since it hit a low of 50 in June 2022.
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Median Home Price in Columbus
Over the last several years, median home prices in Columbus have skyrocketed, but the pace has slowed over the past year. As of September 2023, Redfin data shows that the median home price was $330,000 in Columbus — a 6.5% year-over-year increase. Nationwide, the median home price was $412,000.
“The average price for a house in Columbus, which shows how the local market is doing, has changed to match what buyers can afford and what sellers expect,” Feick says. Feick noted that home prices in Columbus have come down over the last few months, “so it looks like both buyers and sellers are starting to have a bit more of a positive outlook for the rest of 2024.”
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Combined with high home costs, home affordability is low with higher interest rates. However, there have been recent improvements. As of January 11, Freddie Mac’s data shows that the average 30-year, fixed-rate mortgage interest rate was 6.67% — down from 7.79% in October. Although rates are still much higher than buyers were accustomed to in 2020, 2021 and at the start of 2022, it’s a big improvement.
Renters have also seen an increase in rent prices. The median rent in the Columbus area in Septmber was $1,544 per month, a 3.4% increase over the previous year, according to Zillow data. This is well below the national median rent of $2,047.
Unemployment Trends in Columbus
According to the U.S. Bureau of Labor Statistics, the unemployment rate in the Columbus area has been on a downward trend since the beginning of 2023. In September, the unemployment rate was 3.2%, a 0.1% decrease from the same month last year. This is below the national rate of 3.8%.
The Columbus region could see even more job opportunities this year. Companies looking to expand in Ohio received meaningful investments to stimulate job growth in 2023, and the new year brings several major programs to further grow the state’s economy.
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Despite improvements in job opportunities, there’s been an increase in delinquencies and foreclosures
. Data from Black Knight Inc. shows that 0.7% of homes with mortgages in Ohio experienced foreclosure activity in October 2023, up by 0.2% over the last year, while delinquency increased by 0.8% to 3.9%. At the national level, the delinquency rate was 3.17%, which is loans 30 or more days past due but not in foreclosure. The national foreclosure rate was 0.41%.
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Builder Confidence in Columbus
“Builder confidence has experienced some fluctuations as well. This is influenced by both economic uncertainties and material costs,” Feick said.
The National Home Builders Association and Wells Fargo Housing Market Index reported homebuilder sentiment in the Columbus metro area was rated 37 out of 100 in October, which is the same rating as the year before. The index attributes a positive outlook to scores above 50. In Columbus, builder confidence hasn’t been positive since July, when the rating increased to 56 from a low of 31 in December 2022.
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The Architectural Billings Index, which is an economic indicator for nonresidential construction activity, was rated 49.3 for the Midwest from the American Institute of Architects. That’s a drop of 2.8 points year over year. A score above 50 indicates an increase in firm billings from the previous month. While the current rating is lower, it’s still in line with normal market fluctuations.
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Columbus Real Estate Market: Predictions
Despite low builder sentiment, Columbus could see an increase in new construction permits in the coming months to accommodate the region’s growing population and need for new homes. Additionally, there is a good chance more buyers will return to the market as affordability concerns ease for some buyers. Although home prices aren’t expected to drop, the Federal Reserve signaled that rate cuts are on the horizon, which could help push down mortgage rates.
By February 2024, the U.S. News Housing Market Index predicts that single-family housing permits will decrease to 390 and multifamily housing permits will decrease to 482. Predictions for single-family permits have been in line with data; however, multifamily predictions were lower than reported numbers.
“My prediction for this year leans towards a market that is cautiously optimistic,” Feick says. “We’ll see a gradual stabilization in prices and an increase in supply as builders navigate through the current economic landscape.”
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Columbus Housing Market Forecast originally appeared on usnews.com
