The busiest season for home sales is kicking into high gear, bringing deja vu to buyers faced with the same high prices, high mortgage rates and historically low inventory that plagued the spring and summer sales season last year.
So, why is it still such a tough time to buy a house?
The Enquirer compiled a series of charts using monthly market data from national real estate brokerage, Redfin, showing the trends weighing on homebuyers in the Cincinnati metro area as they hit the streets in search of new digs.
New listings and inventory are up …
Home prices typically hit their lowest point in January and February when there are fewer homes listed for sale and fewer buyers in the market bidding up prices.
This year is different.
The local housing market has already seen a significant spike in the number of new listings and inventory available for sale.
New listings in the Cincinnati area rose 17% in February, compared to the same month last year, according to Redfin. Meanwhile, total inventory rose by more than a third (35%) over the same period.
But the increased supply still isn’t enough to satisfy growing demand and keep price growth in check, which is a statewide and national trend.
… But not up enough for demand
The total number of active listings, about 4,770, represents less than a two-month supply of housing − which means it would take no more than 60 days to sell out of the inventory if no new inventory was added.
A healthy housing market typically has at least a five- or six-month supply of housing, giving buyers more options, resulting in less competition and more moderate price growth.
But prices continue to march higher at a blistering pace in today’s market.
“There does seem to be more inventory that’s waiting for buyers this spring, but demand is still high enough that the market is still out of balance. It’s still a sellers’ market,” said Clint Copenhaver, a veteran Realtor and vice president of sales for Robinson Sotheby’s International Realty in Southwest Ohio and Northern Kentucky.
Median home price up 10% from last year
The median home price for the Cincinnati area hit $274,000 in February, up 10% from February 2023, according to Redfin. That’s just 6% off the Cincinnati area’s all-time high median price of $290,000 set in May last year.
Escalating prices are keeping many buyers, especially first-time homebuyers, on the sidelines.
And some are waiting for a reversal in interest rates to offset prices after Federal Reserve officials earlier this month reaffirmed their commitment to cutting their benchmark interest rate this year.
Such a move by the Fed could drive down traditional 30-year, fixed-rate mortgage rates, which were sitting just under 7% last week − the highest in nearly two decades, according to Freddie Mac.
Waiting to buy can cost you
But waiting for interest rates to come down could cost homebuyers more than they might save with lower mortgage payments.
As the spring and summer home sales season gains momentum, the share of homes sold above asking price tends to climb as more buyers enter the market competing for the still meager number of homes for sale.
Last year, the share of homes selling above list price steadily increased from 20% in January to a peak of 42% in May, according to Redfin.
This year, 30% of homes for sale in the Cincinnati area were already selling above list price in February.
Waiting for interest rates to come down also carries opportunity costs that can leave buyers wishing they had acted sooner, according to Copenhaver.
“I do think that interest rates are going to come down, but I don’t think that should be the primary factor in deciding whether or not this is the best time to get into the market,” he said. “Everybody who waited last year to get into the market is now at a substantial disadvantage.”
That’s because prices keep going up, making it even more costly to buy this year than last year, he said.
Buyers who wait also forfeit serious gains in home value and equity, Copenhaver said.
For example, Cincinnati area homebuyers who purchased their homes just five years ago have seen median prices climb by more than $100,000, according to Redfin.
Marginal fluctuations in interest rates “become immaterial when you can take that kind of value out of your house,” Copenhaver said.
Realtors’ settlement a silver lining?
Despite the headwinds, there may be a silver lining for buyers and sellers in the housing market this year as a result of a series of class-action lawsuits against the Chicago-based National Association of Realtors.
The nation’s largest association of Realtors with more than 1.5 million members agreed earlier this month to settle the lawsuits by paying $418 million in damages.
The Realtors group also agreed to preclude sellers’ agents from offering commissions to buyers’ agents in Multiple Listing Service listings.
Sellers’ agents have historically advertised commissions between 5%-6% on their MLS listings and split the commission with the buyer’s agent after the sale, which the lawsuits claimed forced buyers to pay excessive fees.
The Realtors’ association also agreed to require buyers’ agents to sign contracts with their clients, listing the fees for their services.
Some experts predict the settlement will give buyers and sellers more leverage and slash transaction costs.
But the settlement still needs a federal court’s approval, which may not occur until this summer.
Until then, it’s business as usual.
