On a recent Saturday night around a neighbor’s campfire, the topic of the Columbus housing shortage came up. Each of us had a story to share of a friend or family member who entered a bidding war, offered a significant price over asking, maybe with an unlimited appraisal gap, or even a waived inspection, to secure a new home. And we have many friends still in the battle for a new home after writing multiple offers. The Columbus housing shortage and accompanying skyrocketing prices are hot topics on the front page of every newspaper and real estate website these days. While the short answer to why we have a shortage is low inventory, the full answer is a little more nuanced.
New construction is at a historic low.
Although there are overlapping reasons why the housing supply has not kept pace with the soaring household demand, the primary cause of today’s housing shortage is the long-term decline in the new construction of single-family homes. Nowhere has this decline been felt more than in the supply of entry-level, single-family homes. As this chart shows, new construction of these homes dropped to 7% of all new construction in 2020. This is a significant decrease from the 1980s when starter homes made up 40% of total construction activity in the United States.
Demand for starter homes is strong.
Millennials, the largest demographic in the United States at 72 million strong, are approaching first-time home buying age. The homeownership rate for 25-34 year-olds is on the rebound and has been steadily increasing since 2016 after the Great Recession of 2008-09. It is anticipated that the demand for entry-level, single-family homes, also known as ‘starter homes’, will remain high for the remainder of the decade as this cohort of young adults remains at the peak of first-time home buying.
Yeah, but… I thought the older Boomers are retiring. Doesn’t this free up inventory?
There is no place like home. A recent AARP survey of adults aged 50 and up shows that 3 out of 4 adults plan to remain in their homes and communities as they age. An increase in both the number of in-home providers and the services they provide has made it attractive for older adults to remain in their homes rather than sell and move into retirement communities as previous generations did. This concept of “Aging in Place” has compounded the already existing Columbus housing shortage of available housing options for upcoming generations.
In Short: The combination of our housing shortage and high demand has forced sale prices for starter homes to skyrocket well above asking prices. This has caused the significant affordability issues now facing first-time home buyers. Buyers are expected to come up with even larger down payments or close appraisal gaps in addition to normal costs associated with buying a home.
Good news may be on the horizon, however.
There is evidence of early signs of relief in the housing shortage. Nationally, home sales from January to April in 2021 were up 20% compared to 2020. This reflects growing confidence among sellers. If supply continues to increase, buyers can hope to get some much needed relief.
I’m a First-Time Home Buyer. What Can I Do?
It pays to have an advocate on your side. LifePoint Real Estate Consultants guide you in your real estate journey from where you are to where you want to be. Our team members are some of the most passionate in Central Ohio and by working with a local brokerage, you have direct access to the owner, broker, and managing partners. Our agents are hand-selected, highly respected real estate consultants who fully embrace a customer-first approach to real estate. We elevate relationship-building to the forefront of every client interaction and are community leaders who support local charities.
Leave a comment with your biggest question – or call me, Siobhan Blake, directly at 614-371-2727 to get some expert advice!
