Housing levels have reached historically low inventory. What does that mean for you? The buyer or the seller? All that coming up. My name is Eric Sztanyo from Keller Williams Realty and team Sztanyo.com, where we are helping you find your home and strengthen your family. I wanna talk to you guys about this article that just came out this week and everything in this article to me speaks Yes! That’s exactly what I’m feeling as I’m working with you guys, helping you try to buy houses, but I want to read it to you and kind of give you an overall summary update of what’s happening in the market right now. This article just came out in the Cincinnati business courier titled “Our incredible shrinking housing market.” Greater Cincinnati’s housing has reached a historically low inventory, but interest rate hikes and soaring prices may finally increase options for would be buyers. The keyword being “may” let’s dive into it.
Let’s read about this couple and you guys might know the feeling.
Buying A House In This Current Crazy Market
“Marcus Calhoun and Amanda Ban felt good about their first offer on a home for attending an open house, the married couple put in a strong offer, $30,000 over the asking price. They didn’t come close. The winning bid was much higher and all cash. “We’re a young couple.” They said “we didn’t have the capital to splash on the first time we saw” It was a morale blow.”
I know the feeling a lot of you guys, if you’ve gone shopping, you’ve gone 20, 30, 40 over and still lost. You’re like “Uh, what?”
“But Calhoun and Bena persisted, living in a two-bedroom apartment downtown with a baby on the way, the couple was determined to find a home with more space in time to set up the nursery. They changed their strategy. Checking in with their real estate agent, Tracy and men from Coldwell Banker Realty. Several times, each day. Eventually, they found a place in Oakley, a three-bedroom, one-and-a-half bath home with wood floors and a large deck. After moving in earlier this month, Calhoun and Bena are glad to be out of the home race. “You don’t want to go back out there.” Calhoun said.”
I love that. I can relate to that line. It is a jungle out there. It is dangerous. And buyers who’ve gotten a house are like, thank God. I don’t have to do that again.
“They are among the lucky ones for every buyer who lands on a home. Far, far more are left out in the cold.”
It’s a sad story, but it’s true. It’s the reality of the real estate market right now.
“Cincinnati was in a seller’s market long before the COVID 19 pandemic hit. But as soon as the stay-at-home orders were lifted in Ohio. At the end of May 2020, the market jumped into overdrive.”
Cuz I remember this exactly right when COVID hit, everyone thought the market was gonna tank, and here’s the shift. And we’ve been going up for so many years, but finally, it’s gonna go down. And the exact opposite happened because so many more people now wanted to buy a house. You didn’t wanna live in a tight cramped apartment with other people. You wanted to get your own space. You didn’t know much about the pandemic or how it spreads. So you wanted to be safe. And so it only increased demand and a decreased supply cuz sellers didn’t wanna let people into their houses.
“A so-called “balanced” residential real estate market for this area is to have 5 1/2 to 6 months supply of inventory. Meaning if no more homes were listed for sale, the inventory would last that long.”
That’s a normal market.
But Cincinnati’s inventory has not been above a 3 1/2- month supply in five years. And since the pandemic, there’s only been more than a one-month supply on three occasions”
I say this over and over to people. I’m like, we’ve been telling people the same thing for the last several years, which new historically low inventory and you can’t really go much lower. Can you? That’s kind of what it feels like right now.
You guys can check out this chart. That’s showing the number of homes for sale in the Greater Cincinnati home market where it started back in January 2017 and July 2017. Around 5,000 and a half thousand units all the way down to its low point in February 2022 of 1,215 houses on the market.
“According to the multiple listing service of greater Cincinnati. At the end of April, there were only 1,410 active local listings.”
That’s a 21-day inventory. Means, if no new homes came on the market, everything would be sold in 21 days. It’s just, it’s crazy.
“It’s unprecedented said Peter Chabris, a 20-year real estate veteran and lead agent for the Chabris group at Keller Williams, Seven Hills Realty. The pendulum swung from 10 years ago when we had the worst housing market ever coming out of the great recession to the most extreme sellers market ever.”
So you had a buyer’s market where everything was on sale and nobody could sell a house to now, nobody can buy a house it’s like the complete opposite.
“The historic market is due to a perfect storm of factors. Experts say, massive federal stimulus, minuscule unemployment levels.”
So everyone’s got a job and a ton of money came into the market.
“A lack of new home construction and ultra low-interest rates all coalesced.”
So we hit down to the twos. I was able to refinance my house around 2%, which was unbelievable. Now we’ve obviously jumped up from that. But all of those factors when we hit that lowest interest rate, no supply, that’s created this extreme seller’s market.
“And so far increases in home prices. And the rapid rise of interest rates have done little to temper demand. Indeed, Robin Sheakley, president of sibcy Cline realtors said a West Chester township home priced under $300,000 received 66 offers in March. Inventory continues to be the golden ticket for anybody in the industry. She said, buyers must be aggressive. If they plan to win the keys to the castle, cash offers, price escalation clauses, appraisal deficit clauses, and inspection waivers are now standard procedure.”
If you talk with me about buying a house, these are some of the strategies we talk about. I usually tell people, look, if you’re looking to shop for a house on the market that just hits the market, you need to shop under your budget. So let’s say your budget’s four $450K. You should be shopping in that $375K to $425K range because you’re gonna need to escalate or make the highest and best offer up to your max budget. So you wanna shop underneath that because you’re gonna have to beat out other buyers. That’s step number one is a bit over.
Another thing that’s happening a lot is waving inspections, which you want to have a good set of eyes on that before you can actually do that, but that’s certainly happening in the market.
The next thing is an appraisal gap. Meaning if the appraisal, for some reason falls short because you had to bid up so high, an appraisal gap clause says I’ll pay that difference in cash because what’s happening is the lenders only gonna lend up to where it was appraised at from the bank. And let’s say that’s$425K, but you have it under contract at$450K. That means either you have to come up with that cash of $25K or the seller has to come down in price to $425K on the purchase price. They don’t want to do that. So an appraisal gap clause for this period in the middle says,we’ll make up the difference. And it gives that seller, all that more comfort in your offer, knowing, Hey, you bid $450K, we’re on a contract at $450K , I’m gonna get $450K for it and to beat out other buyers.
That’s what you have to do in this market. Just did that this weekend with some buyers, we were in multiple offers. We waived inspections, actually my lender that we used, the lender that I recommended had an appraisal waiver, which was fantastic because it means they didn’t have to have an appraisal. That’s why cash offers oftentimes win because they don’t have to have an appraisal at all. So the sellers are guaranteed to get that amount of money without an appraisal shortage, potentially getting them less money. Makes sense? If not, just go back and rewind and watch that again.
“A healthy residential market is a critical component of the region’s economic engine, even with an extremely tight market in 2021, Southwest Ohio was able to record 27,704 home sales for a total sales volume of nearly $7.8 billion. The national association of realtors, estimates that one job is generated for every two home sales, but beyond actual sales, the housing market creates business across industries from construction and insurance to appraisals, landscaping, and furniture.
It was just a much rockier road for buyers to get to the finish line.
Inventory is constricted across all price points and geographic areas. In early May. There were only two homes for sale in Indian hill.”
Now, if you don’t know, the Cincinnati area, Indian hill is kind of like the the luxury neighborhood of Cincinnati. It’s where the highest price homes typically have been historically.
“Julie Beck (who sells in Indian hill) executive sales vice president with Sibcy Cline realtor said in her three-decade career, the number of available homes in Cincinnati’s toniest suburb has never been this meager. “The lowest I remember was 60 listings when I got in the business” back said. “The high end market is moving. “
So not only are the low-price homes where there are a lot of first-time home buyers like Uber competitive, but even the upper echelon, the high price million, $2 million, $3 million homes are also moving.
“But slim pickings, aren’t just confined to the luxury market.”
“As of March, 43% of homes across the region were selling above list price. That’s up from 34% in March 2021, according to digital real estate services company OJO Labs.”
So 43% of homes are over list price. That’s including guys, all the sales of the homes that have like something wrong with it or that are selling As-Is, that includes all the inventory. So that means if something is cute in a decent condition and priced decently well, it’s going above ask price.
“Nationally, inventory rose 11.6% in March. In Cincinnati, listings climbed 9.8%. But there were 161 fewer listings at the end of April 2022 when compared with April 2021.”
Again, how can inventory get any smaller? It did again.
According to Chabris, there are about 6,400 licensed real estate agents operating in Greater Cincinnati today. That translates to four agents for every one listing.”
There are no listings listing! There’s just, there’s no in this is crazy. Oh my God, what is happening?
“It feels like a recession,” Chabri said. “So many people want to transact and they can’t.”
“Trying to buy a home in this market takes effort, energy and emotion. It’s a challenge for both buyers and agents. Sheakley said.”
There’s no question guys. If you’re trying to buy a house that is on the market, gear up. When we have our buyer consult. When you guys call us here at team Sztanyo, you’re gonna talk to Carrie. We’re gonna get you set up for a call. I’m gonna tell you what I’m gonna tell you right now. Get ready. It’s dangerous out there.
If you wanna buy a house that’s hitting the market. You need to gear up and you need to be ready to go over asking price, and potentially wave the inspection. to have that appraisal gap. Like you need to be ready. Or you can buy a house that’s overpriced and has something wrong with it. That’s another option. There’s gonna be less buyers for that home. Cuz it’s been sitting 10 days plus or something like that. But it’s got something wrong with it. Or you can buy new construction and that’s gonna be a little bit costlier, but you get to pick out everything you like on the front end. You don’t have to be crammed into a house you don’t necessarily like. And the competition it’s just so much less stressful, in my opinion. I mean building a house I guess has its own stresses If you’re starting from scratch. But if you’re buying a market-ready home, you’re not having to compete against all the other buyers in the craziness of everything.
It’s pros and cons to each way, just that’s kind of where we’re at in the marketplace. There’s another chart here that you guys can check out that says “Dollar Volume Stays High.” That despite a historically low inventory on the market, the gross dollar amount of sales and greater Cincinnati has stayed strong thanks to storing home prices. So what this chart is basically saying that even though there’s been less sales, because there’s historically low inventory, the overall sales volume is about the same because prices have gone up so much because supply low demand, high, prices up. Remember Econ 101? Continuing on here.
“Back, who had the highest sales volume for an individual agent in Ohio ever last year, is ahead of where she was in 2021, but knows she’s in a unique position. She says “A lot of my colleagues are not doing well because they can’t get houses” With nothing to sell, the last couple of years have been very difficult on agents, as real estate commission-based insdustry. Sibcy Cline is even hosting wellness events to help support its agents.
So you might think watching this, oh, Boohoo cry me a river for the real estate agents. And I get it. With housing prices going up. You’re like you’re making a lot more money. Yes, but it’s really the people who are good at generating leads who are making more money. And everyone else is really struggling because there are not enough houses for them to sell. And it’s hard. Like I’ll be honest, like the stress that we have as agents, if you’re trying to win a house, that’s hitting the market is pretty tense. And like we’ve had to make sacrifices for our family to be ready to make an offer. And like it’s a lot, it’s been hard on agents. Again, you don’t have to have pity on me or us, but it’s been a stressful environment for a few years, no doubt.
“Investors sucking up a chunk of single-family homes adds yet another wrinkle to the historically low inventory issue. Scott Nelson, CEO of Comey & Shepherd, said 18% of sales nationally in March were to investors and second-home buyers. When the rental market peaks and renting single-family homes become less attractive. That should loosen up a sizeable piece of inventory in land.”
So, beyond there being historically low inventory, beyond there being inflation, beyond there being housing prices going up. Buyers also have to deal with investors who God bless America and God bless capitalism, but they’re trying to sink their money into a non-inflationary asset, which is real estate. And so you’re also competing against these investors who have cash offers. That’s just making it even harder for you as the buyer.
“Mike Ericksen, academic director of the University of Cincinnati Real Estate Center, is himself an example of what’s happening in the market. He’s taking a position at Purdue University and he just sold his Hyde park home.”
“Ericksen had planned to list for $800,000; His agent recommended $825,000. It sold for $860,000 to an all-cash buyer with no contingencies.”.
This is the guy who is the academic director of the University of Cincinnati Real Estate. And he wanted to put his house $60,000 under what it sold for cash with no contingencies. That’s where we’re at guys.
“Even though Cincinnati home prices have shot up over the past two years, Erickson said income has generally outstripped price growth. And according to Zillow, typical Cincinnati home values are up 15% year over year.”
So, you know, I did another video on this, where I talked about the $75,000 loss that you had if you sat out of the market two years ago, if you rented instead of buying a $300,000 house and I was conservative, I said 25%. This is saying it’s up 30% over the last year. So you would’ve lost $90,000 in equity by not buying a house.
“Sibcy Sheakley expects to see inventory begin to creep up this year. But with demand also expected to remain high, she anticipates another strong sales year .”
“With everything going on in our world. The value of a home being a cocoon is as strong as it ever was.”
“Chabris’ advice for potential buyers is based on history, owning a home. He said, lets you build equity slowly over time or super fast in the last few years, enjoy the tax benefit of writing off interest. And it provides a place for you and your family to make memories as long as you’re a believer in the American economy, which has an unprecedented record home ownership makes sense.”
So, yes. This is what we talk about again, all the time on the channel. We believe that home is where your family grows strong together. And so besides the economic benefits of owning a home, it’s also your own place. It’s your own respite. It’s your place where you’re making memories. It’s your place where you can retreat back at the end of your Workday. It’s a place where you can train your children. It’s a place where you can invite others into the hospitality and warmth of your own home. Homeownership is amazing and it helps make families grow stronger. So we believe in it. So even though it is a crazy market to try to buy, it’s still worth going after.
“Meanwhile, back in Oakley, Calhoun and Bena have recently picked out nursery furniture and they’re relieved to be settled ahead of their little one’s arrival.”
It’s great pregnant, babies coming. It was crazy out there, but they caught their place. They can set up their nursery.
“But Calhoun hasn’t forgotten the struggle it took them to get to this point. He recommends potential buyers remain persistent. “Just keep at it.,” he said “It can’t be this crazy forever.”
Well, let’s all hope that’s the case.
Help In Buying or Selling A House In A Historically Low Inventory Real Estate Market
I hope this was helpful for you to understand where the market’s at right now. If you want someone on your side who can help you win in this crazy market and historically low inventory, give us a call at team Sztanyo (513) 813-6293.
We’re either gonna help you with the best strategies to win in this crazy hot seller’s market as a buyer, or we’re gonna provide you with some other strategies. Like I said, buy the one that’s been sitting, and fix it up a little bit. We can go in with maybe a lower offer on that one or we’ve got some awesome new construction builder relationships in the area we can connect you with as well. If you’re a seller and you’re like, yeah, I want to sell. But, what am I gonna do next? Give us a call as well, because we’ll talk you through that strategy and that transition between getting the most for your home now and buying the next one.