Frenzied quest for Columbus homes leads to record price hikes and home shortages

Jim Weiker
The Columbus Dispatch
Richard Duarte has been looking to buy a home in South Clintonville but, like many central Ohio home shoppers, he's lost multiple bidding wars.

Central Ohio homebuyers are competing like never before, as low interest rates and a severe shortage of properties have prompted a frenzied search for anything with a for sale sign. 

Figures released Friday by the Columbus Realtors trade group confirm what many already know: More central Ohio homes sold in 2020 than ever before. They sold for more money, and they sold faster than ever. 

Buyers paid a median price of $232,000 for a Columbus-area home last year, 10.5% more than the year before, by far the biggest price hike in central Ohio history. A home that may have started the year worth $300,000, in other words, ended the year worth $331,500.

List prices became starting prices as bidding wars became the norm. During the year, the average central Ohio home that sold commanded 99.8% of its asking price, while many sold far above asking.

Buyers spent the year in a whack-a-mole quest for homes that seemed to vanish the moment they appeared. More than 15,000 of the 33,341 central Ohio homes that sold last year sold within five days, and another 6,000 sold in five to 10 days. 

At the end of the year, 2,049 homes were listed in central Ohio, about half the number on the market at the end of the three previous years. 

Veteran real estate agents say they've never seen a market so tilted in sellers' favor. 

"I’ve done this for a lot of years, and I've never seen anything like this," said Pat Kearns-Davis, an agent and broker with Re/Max Capital Centre Realtors. 

"There’s a waiting line for people for all the houses that come up."

That is often literally the case, as shoppers (and their agents) are frequently given 30 minutes to tour a home and make one of life's biggest financial decisions before allowing the next shopper to get a look. 

"It's almost like you don't even have time to think," said Ray Sims, a 35-year-old research scientist who moved to Columbus with his wife and daughter almost a year ago from upstate New York. 

"You make a reservation to see a house and you get a time slot to see it, and within hours, there are offers in the works or already submitted. You have to do all your analysis relatively quickly," added Sims, whose family is renting a Dublin-area townhome while searching.

"It's stressful. It changes your mindset. You ask yourself critical questions very quickly."

Sims estimates he and his family have looked at four dozen homes and made offers on half a dozen. They started looking in the upper $300,000s, but have raised their budget above $500,000 because they were finding so few homes. 

The number of central Ohio homeowners who put their home up for sale declined last year compared with previous years, perhaps out of pandemic concerns. At the same time, more people bought homes than ever before. The result: a dwindling number of homes on the market, even into the winter holidays, normally a time when the market relaxes.

"It’s just absolutely insane," said Andrew Show, owner of Buyer's Resource Realty Services in Worthington, which represents home shoppers. 

"I've been in this business 29 years, and this is absolutely the hottest market metro Columbus has ever seen. Homes are flying off the shelves, and it continued through the fall and into winter. My crew is helping buyers and they're coming up against 10, 20 offers with homes. ... and 10%, 15%, 20% over asking is becoming the norm."

Richard Duarte, a 44-year-old Upper Arlington teacher who lives in a Short North condominium, experienced the frustration firsthand when he started looking for a home in the South Clintonville neighborhood this fall. 

Duarte's needs weren't extravagant — a three-bedroom home with a first-floor bedroom and two baths — but he soon discovered it wouldn't be easy with his $300,000 budget.

"I learned the asking price was really just the beginning," said Duarte, who has been outbid on two homes. 

"I have gone to see seven homes, and out of those seven, five had bids the first day.  … The only reason they didn’t sell right away is the seller wanted to see if they could get more and asked for bids." 

Such a selling strategy — to request "highest and best offers" by a deadline — has become common, say agents. 

"I tell our buyer clients, if you think you’re going to get something for asking price or below asking price, we’ll have to look at a stale listing that’s been on the market," Show said. "For a lot of clients, it takes several failed offers before they understand that."

While the stay-at-home pandemic is driving some central Ohioans out of their apartments and into homes, or from smaller homes to bigger ones, experts say interest rates are even more important. The average 30-year mortgage rate fell below 3% in July and has stayed there since, hitting a low of 2.65% earlier this month, according to Freddie Mac.

"What's driving demand?" asked Kearns-Davis. "It's interest rates, 100%." 

Unlike previous years, when luxury homes lingered on the market, demand was strong across the board for central Ohio houses. More million-dollar homes sold than ever before last year, many for cash. 

"We knew the $100s ($100,000s), $200s and $300s were in short supply, but now it’s creeping into the $500s and $600s," Show said. "And people even in the $400s and $500s are paying cash. That's hard to compete with." 

The Columbus metro area is hardly alone. More homes sold nationally in 2020 than any year since 2006, according to the National Association of Realtors. U.S. home prices skyrocketed 12.9% last year, outpacing central Ohio, while the number of homes for sale fell to historic lows coast to coast. 

Home shoppers hoping for a reprieve in 2021 aren't likely to find it. Experts expect the market to remain hot, with the huge caveat being interest rates. 

"Interest rates are the lowest in history," said Ted Jones, chief economist and senior vice president with Stewart Title Guaranty Co., who presented his annual real estate forecast to Columbus Realtors on Thursday. 

"When they start to rise this year, you will see home sales retract a bit. I don’t expect another record."

The National Association of Realtors forecasts central Ohio home prices to rise 7.6% this year, while Zillow forecasts Columbus-area home values to climb 7.3%.

Those numbers would be exceptionally high in typical years, but they aren't enough to land Columbus in the top 10 hottest markets for 2021 by either Realtor.com or Zillow.

But it's close: Realtor.com puts Columbus at No. 11

jweiker@dispatch.com

@JimWeiker

Shopping for a home? Experts say buyers should:

• Get preapproved for a mortgage by a lender.

• Be ready to look at homes and make a decision fast, sometimes within a day or even hours.

• Be prepared to offer more than asking price. 

• Anticipate landing in a bidding war and know exactly how much they are prepared to spend before getting pulled in.

• Be ready for the home not to appraise at its sale price. If possible, set aside money to make up the difference between the appraised value and the sale price.

• Consider making concessions, such as allowing the seller to remain in the home for a few weeks after closing or not requesting repairs on the home from the seller.

• And most important: Stay away from buying a home they're not happy with. Another one eventually come along.