The Ohio real estate market has experienced every end of the housing sector spectrum in as little as a decade. This time ten years ago, home prices bottomed out from The Great Recession. Today, real estate in the Ohio housing market tests new highs on a regular basis. However, the Federal Reserve's latest attempt to combat inflation onset by the pandemic has seen mortgage rates in The Buckeye State more than double and mortgage applications fall off a cliff. As home prices continue to climb, demand subsides, which begs the question: Is Ohio a good state for real estate investing? Despite historic rates of appreciation, the Ohio real estate market remains a great place to invest. Most notably, Ohio has one of the highest foreclosure rates in the country, granting investors the opportunity to simultaneously help distressed homeowners and secure a deal below market value.
The Top Ohio Real Estate Markets
While the best real estate market in Ohio is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Average Sales Price: 260,232 (+7.1% Year Over Year)
Home Sales: 13,785 (-15.0% Month Over Month)
Median Rent Price (1 & 2 Bedroom Units): $1,065 (+7.0% Year Over Year)
Price-To-Rent Ratio: 17.05
Unemployment Rate: 4.0% (latest estimate by the Bureau Of Labor Statistics)
Population: 11,780,017 (latest estimate by the U.S. Census Bureau)
Median Household Income: $58,116 (latest estimate by the U.S. Census Bureau)
Foreclosure Rate: 1 in every 1,027
Ohio Median Home Prices
With a median home value of $216,746, real estate in Ohio is relatively affordable (at least when compared to the national average). For some context, the median home value in the United States is $357,810, or approximately 65.1% more than Ohio's median home value. In both cases, home prices have increased for the better part of a decade. Pent-up demand and relatively low interest rates drove competition for an entire cycle, the culmination of which was the market created by the pandemic.
While prices in the Ohio real estate market have increased for ten consecutive years, the fastest rate of appreciation took place over the last couple of years. Since the start of the pandemic, in fact, the median home value in Ohio has increased by 36.4%. In that time, demand increased in the wake of historically low interest rates. As the Fed reduced borrowing costs to avoid another housing crisis, buyers came out in droves and created a level of competition the state had never seen before. Sellers gained all the power and increased their asking prices accordingly.
Home prices in the Ohio real estate market are expected to continue rising, but at a slower pace than the sector has gotten used to. If for nothing else, the Fed is attempting to crush the inflation it created by lowering mortgage rates. In doing so, the Fed has more than doubled mortgage rates year-to-date and decreased mortgage applications. The lack of activity has already taken some power away from sellers, and should eventually lead to a drop in sales prices. For the rest of 2022 (and most of 2023), however, prices will rise from a lack of inventory. There are still too few homes to keep up with demand, which will push prices higher—albeit at a slower pace than in recent history.
Ohio Median Rent Prices
While it may be too early to call it a trend, it looks like rents are starting to show signs of cooling, just like home prices. According to the November 2022 Apartment List National Rent Report, the national rent index "fell by 0.7 percent over the course of October, marking the second straight month-over-month decline, and the largest single month dip in the history of our index, going back to 2017." The drop may share a correlation with home prices, but there's also the possibility it is due to seasonality.
Similar to national trends, rents in the Ohio real estate market have declined for two consecutive months. In that time, the median rent for one- and two-bedroom units has decreased by 1.3%. Following the two-month drop, the median rent for a one- and a two-bedroom unit in Ohio is now about $1,065. For some perspective, the median rent in the United States for similar units is $1,371, down 1.0% over the last two months.
The median rent in Ohio is expected to drop as the weather cools off and the housing market slows. However, if home values continue to appreciate and supply remains tight, more people will be forced to rent despite their economic capabilities. If competition picks up in the spring, rents will most likely rise along with demand.
Ohio Foreclosure Trends & Statistics
According to ATTOM Data Solutions' Q3 2022 U.S. Foreclosure Market Report, "there were a total of 92,634 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 3 percent from the previous quarter and 104 percent from a year ago." In September alone, a total of 31,836 U.S. properties filed for foreclosure, down 8.0% month-over-month and 62.0% from the same time last year. There's no doubt about it; foreclosures are on the rise, but they have yet to return to pre-pandemic levels.
“Foreclosure starts, while rising since the end of the government’s foreclosure moratorium, still lag behind pre-pandemic levels,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “Foreclosure activity is reflecting other aspects of the economy, as unemployment rates continue to be historically low, and mortgage delinquency rates are lower than they were before the COVID-19 outbreak.”
In the third quarter of this year, the Ohio real estate market had the fifth-highest foreclosure rate out of all the states. With one in every 1,027 homes entering into the foreclosure process, Ohio weighed on the national average. For added context, one in every 1,517 U.S. properties filed for foreclosure in the third quarter of this year.
The counties with the highest distributions of foreclosures in the Ohio real estate market were (from highest to lowest): Cuyahoga, Marion, Fayette, Summit, and Ashtabula.
Tax Lien Investing
Tax Lien or Deed: Tax Lien state
*Sales only held in counties with more than 200,000 in population
Interest Rate: 18%
*Only for Institutional investors
Redemption Period: 1 year
Ohio Real Estate Investing
Home sellers, whether investors or traditional sales, have done well for themselves in recent history. As recently as the second quarter, in fact, "115,198 single-family houses and condominiums in the United States were flipped in the second quarter," According to Attom Data SOlutions' second-quarter 2022 U.S. Home Flipping Report. The number of homes flipped marks a quarter-over-quarter decline of 9.7%, but gross profit margins increased 10.0% quarter-over-quarter. While fewer homes were flipped in that time, profit margins increased from $67,000 to $73,700.
“The second quarter was another strong showing for fix-and-flip investors. The total number of properties flipped was the second-highest total we’ve recorded in the past 22 years, and the median sales price of a flipped property – $328,000 – was the highest ever,” said Rick Sharga.
Investors have done well across the country, and the Ohio real estate market is no exception. Almost anyone who purchased a long-term asset recently has seen its price appreciate. However, nearly a decade's worth of appreciation has made it hard for investors to find attractive profit margins on rehabs. Homes are growing more expensive with each passing month, but there are still plenty of investment opportunities in Ohio. In fact, the new real estate market landscape left behind in the wake of the Coronavirus looks to favor a new investment strategy: rental property investing.
A lot has changed since the pandemic took hold of the Ohio real estate market, but the disruption has opened the door for rental property owners, or those who were looking to become landlords. Specifically, three indicators now look as if they are better than ever for long-term investors in Ohio:
Relatively Low Interest Rates: While more than double where they were at the beginning of the year, mortgage rates are still attractive for rental property owners who know how to lease properties.
Cash Flow Potential: Savvy investors who take advantage of today's rates will lower their monthly mortgage obligations. Lower monthly payments will increase cash flow, and make it a lot easier to pay down the mortgage with someone else's money.
Demand: With a price-to-rent ratio of 17.05, it is more affordable to buy a house in Ohio than to rent one. Consequently, buyers are coming out in droves to participate in the market. However, Ohio doesn't have enough inventory to satiate demand. Even those who want to buy will be relegated to the renter pool, and increase demand for rentals.
Investors are lucky to have several viable exit strategies at their disposal, but none appear more attractive than building a proper rental property portfolio in the wake of the pandemic. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.
Ohio Housing Market Predictions
For the most part, the Ohio real estate market has followed most of the national indicators in recent history. Outside of filing and closing on more foreclosures than most other states, Ohio exhibits the same trends as the rest of the country. As a result, most of the Ohio market predictions will fall in line with those of its national counterpart. That said, what can investors expect from the Ohio housing market in the next 12 to 24 months? Let's take a look at the most likely scenarios:
Secondary cities will receive more attention: Columbus is far and away the most populous city in the Ohio real estate market. As a result, prices are growing increasingly unaffordable. In order to buy a home, it's likely many buyers will look to secondary cities like Akron or Dayton, where prices are a little more affordable.
Appreciation will continue: Homes will continue to appreciate in value because of a lack of inventory. However, the increase in mortgage rates will decrease activity, but not enough to bring home values down. A drop in home values is expected in the near future, but the Fed still has work to do till it gets to that point.
The Ohio real estate market has been incredibly active over the last 10 years. The state's relative affordability has driven activity and catalyzed a hot investing market. Therefore, when the Coronavirus struck, many feared the decade's worth of growth would come to an end. Fortunately, it didn't, and real estate in Ohio may even be better off because of it. Activity has increased year-over-year, despite historic appreciation rates. More importantly, demand remains persistent. All things considered, Ohio may have taken a slight step backward in the second quarter of 2020, but the disruption caused by the pandemic seems to have enabled the entire sector to ignite.
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