How will the Columbus Housing Market Fair in the coming Recession

Columbus, Ohio has had one of the hottest housing markets in the country over the last few years. In fact, according to the most recent Market Hotness Index, Columbus is the #3 hottest market in the country.  Again inventory seems to be having a huge impact on these figures with only a .7% increase in the total number of listings from the previous year in July.

Too Many Buyers
Lower interest rates seem to have been a factor in nudging buyers who had been beat down and stopped searching in 2017 and 2018 to begin looking again. According to the Mortgage Banker’s Association, mortgage applications in June of 2019 increased by 17.9% from June of 2018.  This increase in buyer’s but flatline in the amount of properties being listed has prolonged a steady increase in prices across Central Ohio and beyond.

The Market Hotness Index exposes how local areas are experiencing fast moving supply and rising demand. Using proprietary insights on buyer activity and the most comprehensive data on active inventory, the analysis breaks down demand and supply dynamics to rank metro areas, counties and zip codes relative to the rest of the country. examines listing views by market as an indicator of demand and median days on market as an indicator of supply. It ranked Columbus the #3 hottest market in the country in July of this year (2019), up from #7 in June.

The Coming Recession
The news has been reporting on various factors signaling a coming recession. These stories should not be ignored. Talk of inverted bond yields and the artificial stimulation resulting from the corporate tax cuts have some economists concerned that a recession is imminent. These can freak out those who are considering buying a home in the next few months to a year. Will you be paying too much?  Will you immediately be upside down when the market changes?  Is it a bad time to buy? All of these questions are absolutely legitimate. As a Real Estate Agent who makes a living helping buyers find homes and helps sellers homes I have to stick to facts and recognize my implicit bias.

Don’t Buy a House!!
I recently worked with a buyer who told me his plans to buy something, then sell it within two years. I told him simply “Do not buy a house right now”. Why? Because all signs indicate a slow down is coming. This means it would be much more difficult for him to sell his home for a profit in just two years.

Buy a House!
So you have been renting for years and you are ready for a place to call your own. As long as you understand that you may have to wait 5-8 years to be able to sell your home for a profit, you are good. Also, additionally as important is understanding the additional fixed and variable costs of home ownership. In the random things that can go wrong that do not fall within the confines of your home warranty, you can easily spend $100-$200 per month beyond your mortgage in home upkeep. From lawn maintenance to random shit like trees falling on your home, things will cost money and it is you in the end who has to foot the bill.  If you understand that you should gradually be improving your property as you own it, not just maintaining it, by all means buy a house.

But what about the GODDAMN RECESSION??
Yes, the recession of course. Now is where some opinion based on experience and research kicks in.The recession is going to cause issues for investors first and foremost. Home flippers have come out of the woodwork to get rich from buying homes from homeowners in distress (back taxes, can’t afford repairs etc) repairing them and reselling them at a premium.

Neighborhoods like Franklinton have just recently seen renovated homes sell for over $250,000 for the very first time ever. This demand for distressed properties has driven their price up.  This is causing new flippers getting into the market in 2018 and 2019 to underbudget for repairs  leading to them overpricing the home when they decide to bring it to market.  When these margins shrink and flippers don’t see flipping viable we lose a valuable source of inventory for home buyer’s. 4.5% of the homes on the market in the Columbus area are flips according to the chart below.  If the diminishes to even 2.5% it would increase the buyer/seller imbalance even more making prices refuse to recede. In addition, according to this report from Fox News, our current administration plans to make it harder for investors to tap into their home equity.

So yes, the housing market is going to slow and prices will slowly stop climbing. However, we don’t know when. I believe it will occur when one of three things happen. 1.) When we enter a new prolonged war or some larger event occurs shaking consumer confidence to it’s core 2.) When builders start building a 2005-7 levels or renovations eke up beyond 10% of total inventory 3) When lenders begin deregulating and bringing back loan products that pray on the working class and those who currently do not qualify for a mortgage.  It’s coming, we just don’t know when. It won’t be like last time unless all three of these factors culminate in a perfect storm.

Another thing to consider is that our current administration is driving the narrative of home ownership.  Make America Great Again?  You mean back to when owning a home was a major part of the American Dream?  Look for things like the recent home mortgage changes proposed by the Trump administration to have some impact.



A recent Redfin Article ranked Columbus 7th Lowest Risk of a Housing Downturn in the United States.

Redfin Ranked Columbus, Ohio the 7th Lowest Risk of a Housing Downturn in the US