Record-high mortgage rates haven't taken Ohio away from its spot as one of the country's hottest real estate markets.
Additionally, this state offers many benefits to homebuyers, such as great public schools, affordable real estate, and low living costs.
However, investors should answer a few questions before buying a home in Ohio or any other state. What do the latest trends say about the housing market? Is it expected to crash? Why should people consider buying homes there?
Read on to find all the information you need to make informed decisions about your next real estate investment!
According to the latest reports, home prices in Ohio rose 4.0% in March this year compared to March 2022. On average, the median price for a home sold was $217,600.
Compared to last year's figures, the number of homes sold also fell by 8.1% year over year. In March 2023, 10,725 homes were sold, down 11,664 houses sold over the same period in 2022.
Additionally, reports also showed that houses spent more time on the market before going under contract. The median days on the market rose from 34 to 37 days in March this year.
Ohio Housing Market Trends
The Ohio real estate market has seen a significant increase in home prices. However, the number of units sold has dropped considerably.
As mentioned, homes have been on the market for longer before a potential buyer makes an offer and purchases the unit. However, many believe that the higher average number resulted from rising mortgage rates, as people are struggling to find affordable housing.
Here are more details on the latest trends in the Ohio housing market:
Ohio Median Home Prices
In Ohio, the median home price has risen steadily since January of this year, reaching $217,600 in March, which accounts for a year-over-year 4.0% increase compared to the same month in 2022.
It's also $15,000 higher than the median price for a home sold in the last two months. Previous reports showed that a house sold for $202,200 on average in January and for $208,600 in February.
Ohio Housing Supply
Reports on Ohio's housing supply also showed that there were 28,238 homes for sale in this state, which is 12.4% down year over year compared to last year's figures.
Additionally, 11,945 homes were listed in March. It's a 20.7% drop compared to reports released in March 2022.
Based on this data, the average supply for the Ohio real estate market is 2 months, down one month from January.
Ohio Housing Demand
In March 2023, many homes sold above the list price despite an increase in property values. On average, 33.9% of units were purchased for a higher price.
Only 18.8% of homes experienced a price drop. However, the figure is considerably higher compared to March of last year, as it rose 12.0% in March of this year.
Reports also showed that the Ohio housing market had a sale-to-list price of 98.6%, but it's 2.0 points lower year over year.
Median Days on the Market
The number of days that homes spent on the market before going under contract was also higher, reaching 37. As mentioned, it's 3 more days year over year.
However, the amount of time houses remained on the market in March was considerably lower than the average in January, falling from 48 to 37 days.
Factors Affecting the Ohio Housing Market
The Ohio housing market is often influenced by different factors, including the economy, government policies, mortgage interest rates, and demographic changes. Find more information about it below!
- Economy: In 2022, Ohio's Gross Domestic Product (GPD) rose 1.0%, reaching $620.7b. According to the latest government reports, it's the country's seventh-largest economy. These factors play a key role in the state's economic health and influence the real estate market.
- Government Policies: Tax deductions, credits, and subsidiaries also impact the Ohio real estate market. Property taxes in this state are often higher than the national average. However, the housing market is still strong.
- Mortgage Interest Rates: In Ohio, mortgage rates reached record highs: 6.7% for a 30-year fixed loan, 5.7% for a 15-year fixed loan, and 7.1% for a 5-year adjustable-rate mortgage (ARM). Many buyers don't want to invest in properties as a result.
- Demographics: The housing market is also influenced by changes in demographics, which encompasses the composition of the population based on people's age, income, migration patterns, and gender.
Will the Housing Market Crash in Ohio?
Analysts and economic specialists expect the housing market to slow down. However, most have said that it will unlikely crash.
According to experts, home prices are expected to fall, and residential properties will likely be less affordable. However, most insist that this isn't the Great Recession. Therefore, people shouldn't worry too much about extreme situations.
The following are some of the reasons why experts are sure the Ohio housing market won't crash:
As more Hispanics move to the US and Millennials reach their prime buying years, there are more potential homebuyers. When there's a strong demand, the supply also falls.
Low Housing Supply
Although home prices in Ohio have risen considerably in March 2023, the housing supply is still low. On average, there are only two months of supply.
In addition, the last supply and demand trends also show that Ohio is far from experiencing a real estate market crash.
Drop in Foreclosures
Around 15 years ago, many people had weak personal balance sheets and no equity in their homes. However, trends have changed.
Now, people's equity in their residential properties is significant. Additionally, many have strong personal balance sheets. In other words, a foreclosure crisis is unlikely.
Lack of New Homes
The number of newly constructed properties is still below pre-2007 levels. Additionally, more and more people consider that buying land and getting regulatory approval is not worth it. As a result, increasing the supply quickly is challenging.
Strict Lending Standards
While lenders used to offer mortgages to anyone without conducting credit checks or asking for down payments, getting a home loan is more difficult now. As they must meet high standards, borrowers believe the process is complex.
Ohio Housing Market Statistics
Do you want to review more key information about Ohio's housing market? Here are the latest statistics you should consider to make a wise investment decision:
- According to Zillow, the average price for an Ohio home increased by 6.9% over the past year, reaching $205,800 last month.
- ATTOM Data Solutions says that 34,501 homes across the US had foreclosure filings, including bank repossessions, default notices, and scheduled actions, through August 2022.
- ATTOM Data Solutions' reports also showed that Illinois had the highest foreclosure rate by the end of last year's third quarter. In that state, there was one foreclosure filing for every 1,926 homes.
- According to ATTOM Data Solutions, Delaware was the second state with the most foreclosure filings. It has one of 2,387 housing units in a stage of foreclosure.
- The NAR said that the rate of home appreciation was 7.7% between August 2021 and August 2022.
- Reports from ATTOM Data Solutions also showed that lenders repossessed 3,928 properties across the country through completed foreclosures or REO, which stands for "real estate owned."
- Illinois had 493 REOs, the highest number in August 2022. New York was second on the list.
- There was a drop to an adjusted annual rate of 4.71 million in existing home sales for eight consecutive months.
- Home sales also fell considerably compared to last year's figures, for a drop of 23.8% nationwide.
- Freddie Mac says that the average commitment rate for a 30-year traditional fixed-rate mortgage rose from 5.22% in August 2022 to 6.11% in September 2022, which is up from the 2.96% reported in 2021.
- Pending home sales fell for the fourth consecutive month for a 10.2% drop month over month and a 31.0% drop year over year.
- During last year's second quarter, housing affordability fell considerably due to an increase in the monthly mortgage payment for existing single-family homes.
Ohio Housing Market Predictions
Many buyers and sellers are concerned about the increasing mortgage rates and the significant drop in home sales, which have fallen to the lowest level in a decade.
However, experts offer a broader perspective on what may happen to Ohio's housing market. These are their predictions:
Higher Mortgage Interest Rates
Analysts expect mortgage rates to continue to rise as the country's authorities respond to inflation and other events. The potential recession and increasing geopolitical tensions can also lead to this outcome.
Experts believe that average mortgage rates could reach 8.50 for 30-year fixed loans and 7.70 for 15-year loans.
Since mortgage rates are going up, many people won't invest in property. As a result, home sales could drop as much as 10% this year. The median days on the market is also expected to increase to 35 days.
Lower Housing Supply
In Ohio, the current supply for the real estate market is 2 months. Also, experts expect the inventory to stay low, as homeowners don't want to trade a 3% mortgage for a 7% or higher rate.
Decreasing Home Prices
The low housing inventory will likely result in decreasing home prices. Analysts expect the drop to reach 5.10% this year.
Lower Home Affordability
Experts believe that prices will rise in the coming months, and many are sure that home affordability will remain the same.
A rise in prices is not enough to offset rising interest rates. With high monthly mortgage payments, residential properties are more expensive.
Other Predictions for the Ohio Real Estate Market
According to NAR's Chief Economist Lawrence Yun, mortgage rates will continue to rise in 2023. However, the expert expects that they will return to 5.5-6% in the next two years.
In addition, Mr. Yun believes home prices will rise at least 15-25% this year.
The Final Verdict
Although the Ohio housing market is one of the country's hottest, it was affected by the pandemic. As a result, the median sales price rises but housing inventory remains low.
Additionally, homebuyers continue to struggle with higher interest rates and less affordability. However, experts expect the market to see signs of improvement in the coming years.
Many analysts say Ohio's housing market is unlikely to crash and will remain strong.
Real estate investors who have questions about whether investing in this state is a good idea can seek help from Ohio realtors. Getting expert guidance is crucial if you want to make sound decisions.
Frequently Asked Questions
What Makes the Average Sales Price Higher?
Home prices are influenced by rising interest rates and economic downturns. Overall, the higher the interest rates, the lower the affordability.
However, in the US market, home prices rise when interest rates are low and the economy is strong.
Lower rates attract more buyers. Consequently, high demand for real estate drives up prices.
Is It a Good Time to Invest in Ohio Real Estate?
If you want to buy property in Ohio but are not sure if it's a good investment option, contact an expert! As an investor, you should consider different aspects before buying a home.
What Causes a Real Estate Market Crash?
A real estate market crashes when the home supply is so high but there aren't enough potential buyers.