“As you can see from sales price numbers going up, it’s really not the case,” Castro said. “The overall theme, if you were to put your finger on one thing right now, is inventory. That’s what’s causing everything. In theory, when interest rates triple in an 18-month time period, prices should fall, but they haven’t.”
Castro said one of the reasons for tight inventory is fewer people moving.
“(That’s) because they’ve got maybe a 2% or 3% rate that they don’t want to give up,” he said. “Also, with prices continuing to rise, people are having a hard time justifying the delta between what they’ve got now and what they can purchase.”
There were 11,651 sales of single-family homes and condominiums in the Dayton region reported for the first 10 months of 2023, a 14.2% decrease from the same span in 2022, according to Dayton Realtors Multiple Listing Service, which includes Montgomery, Greene, Warren, Darke and Preble counties.
The average sales price year-to-date is $254,760, a 5.7% rise over 2022′s year-to-date numbers, while the median sales price year-to-date is $225,000, a 9% increase.
For the average home buyer, it’s a little easier to find a house now than it was 18 months ago “just because the competition’s not so extreme,” Castro said.
“Although you’re seeing prices rise, they’re not rising at the rates that they rose 18 months ago,” he said. “You’re not seeing the multiple offers, the $50,000 over list, the waiving of inspections and appraisals and things that your typical (buyers) aren’t going to be comfortable doing.”
Castro cautioned against people thinking “Oh, the market’s soft and I can get something for 15% under market just because the inventory’s not letting the prices fall.”
He said if mortgage rates drop from the mid-sevens to the low-sixes, the home sales market may get “wild” like it was 18 months ago due to pent-up demand, he said.
But Castro said he believes the inventory problem is here to stay.
“When the housing crash happened in 2008 through 2016, 2017, homebuilding was severely hindered, just because no one — builders, developers — was taking the risk on building more housing. That’s a national trend. We have a housing shortage.”
The overall inventory for the Dayton area MLS at the end of October showed 2,241 active properties available for sale, which translated to a supply of 1.8 months based on October’s resale rate, according to Dayton Realtors. The pace of sales was slightly faster last October, with 1,699 listings available, representing a 1.3 month supply available.
Sales of single-family homes and condominiums in just the month of October totaled 1,241 units, a nearly 1% decrease from the sales reported in October 2022.
The median sales price in October was $235,000, surpassing last year’s figure by nearly 19%. The average sales price of $266,378 for this past October exceeded last year’s price by 11%.
Many people like to compare today’s real estate to that of 2008, but that year’s market was the opposite of the current one, he said.
“We had so much building, so much inventory, that as soon as default started happening, there was that much more inventory and obviously, excess supply drives pricing down,” Castro said. “Now, we’ve had the opposite problem. We’ve got no inventory, and that’s what’s keeping prices propped up.”
Just when the home building market was set to recover after the housing crash, along came the COVID-19 pandemic to put a damper on it, followed by last year’s drastic rise in inflation.
So if the easiest solution to the inventory crisis is to build more homes, why isn’t it happening yet to the degree that it will help?
“You turn on the news of the stock market, things are a little volatile, so I think developers are going to be a little apprehensive and I’m seeing here locally, they’re not going gangbusters on adding a whole bunch of inventory and subdivisions and market homes and things like that, because they’re a little unsure,” Castro said.
Home builder Jeff Kelchner, founder and owner of Clearcreek Design Build, said in addition to low inventory and high interest rates, which are “definitely a big part” of the housing sales slowdown, there’s also “a whole lot of people” who financed at 3%.
“When you combine that with lack of inventory, it makes all the sense in the world to stay at home and remodel,” he said. “So you’re seeing a lot more people that are trending towards remodeling versus new construction.”
Kelchner said interest rates are expected to stabilize and perhaps decline.
“I think once we start seeing interest rates come back down, you’ll start seeing new construction,” he said.
Ryan Morris, of Carlisle-based Associate Construction, said one of the reasons why the market is seeing very little new construction is cities and townships “driving the costs up with the requirements.”
“It’s getting very slow,” Morris said. “It takes probably 12 to 24 months to get an approval out of a city, and then the cost overruns with development costs in general, plus the requirements of the city. It’s getting to the point where developers can’t even develop lots in a timeline or at a cost where you can build a house on it and still have a marketable project.
“We’ve been in (home building) for 29 years and we’ve never seen it ... to where it just is coming to a standstill because you hit roadblocks everywhere you go.”
Morris said costs have skyrocketed for infrastructure-related material such as asphalt and concrete to the point that it’s “not really feasible” to develop in certain areas unless market values will support it.
“The big box builders are going to end up the only games in town because of all the challenges,” he said.
Despite current market challenges, there are still opportunities out there for both buyers and sellers, Castro said.
“Price are still rising, they’re just not rising quite as fast,” he said. “If you want to sell, you’ll still get good money for your house because there’s limited inventory ... and then the same thing on the buyer’s end. You don’t have every single buyer in the world out buying because rates are two-and-a-half percent (like they once were), so the competition’s not quite as steep and you’re not having to kind of go out in left field on some of those purchases.”
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