The first half of 2015 was fantastic for real estate. Columbus home sales have increased dramatically over the past year. Home values have recovered from the housing crash and even exceed pre-recession levels. And, days on market (DOM) are at 10 year lows.
According to the latest housing stats for the month of July 2015 published by Columbus Realtors, Central Ohio home sales are up by 9.7% for the year and the average sales price has reached $206,691 (up by 3.9% from a year ago). Even the inventory of homes for sale, which was at historic lows for most of the past 12 months, is slowly rising.
The supply of homes for sale is down to 3.1 months. This means that the current inventory will sell out in 3.1 months, if no new listings are added.
We are clearly in a seller’s market. It’s a frustrating time for buyers who can’t find the home of their dreams and have lost bidding wars on popular properties.
Will the Housing Market Continue to Boom?
With so many records broken in a single year, you probably wonder how long the Columbus real estate market can sustain this kind of growth. Are we heading into another bubble?
Last week’s crash of the stock market (the Dow lost more 888 points in 2 days) is a stark reminder that everything that goes up will eventually come down. I don’t believe that the troubles of the stock market are any indication of a slowing housing market, however, there are some indications that the honeymoon won’t continue for ever.
Signs of a Slow Down
Anyone selling homes will tell you that showings, offers and contracts have been very slow in August. To some degree this is due to the fact that school starts. Parents who wanted to move to a new school district have closed their home purchase in July and have settled in.
Many of our listings did not get any showings in the past 2 weeks. I am talking about desirable, “bread and butter” homes that would have sold in just a few days earlier this spring. This is very frustrating to home owners who did not list their property at the start of the spring selling season. They may have missed the boat. Some sellers will have to settle for a lower price or wait much longer.
There are two good indicators of future sales: Pending Contracts and Days on Market of Active Listings. Here’s what I found:
Pending Contracts
According to the MLS, there were 3,260 pending contracts as of the writing of this article. There were 3,776 at the end of July 2015. A drop in pending contracts is normal for this time of the year. Pending contracts still exceed last year’s number by more than 14%.
Not all pending contracts close. Financing may fall through, inspections may uncover hidden defects unacceptable to the buyer, and the property may not appraise for the contract price. In average 80% of pending contracts actually lead to a closing.
Based on this indicator the Columbus housing market should stay on record pace for the next few months.
Days on Market of Active Listings
This is a good leading indicator for a potential housing slow-down.
The housing reports published by the Columbus Board of Realtors show Days on Market (DOM) for closed transactions. In July 2015 the average DOM was 43, down by 21.8% from a year ago.
Therefore, many sellers assume that their home will be in contract in less than 43 days. But that’s not the case.
To predict how long your property will sit on the market, you need to look at the Days on Market of Active Listings. This number is not publicized much and is substantially larger.
It is currently 94 days for all active listings on the Columbus MLS – for homes above $500,000 it is 137 days.
This spring may sellers counted on their homes being in contract within a week. Not any more. If you missed the prime spring selling season, you may be in for the long haul and you may have to lower your price to attract buyers. If you plan to sell this fall, don’t reserve the moving truck, yet. Your home may be listed on the MLS for 3 months before you receive an offer.
Will We Fall off the Cliff?
There are clear indicators that the housing market will slow down this fall. I don’t believe Columbus home sales will fall off a cliff. There’s a heavy demand for homes by buyers who just could not find the right property, yet.
Home owners will face more competition from new builds. Developers have been catching up over the past few months and added more new homes to the market than anytime since 2007.
Today’s buyers are looking for state-of-the-art upgrades, which many existing homes do not offer. Therefore, they decide to wait for a few months and build a new home.
Call me at (614) 975-9650, to find out how quickly your home might sell this fall!