The 2023 Roundtable Series is sponsored by iSynergy, a digital marketing agency based in Canfield that provides branding, web design, content marketing and search engine marketing services.
Participating in the Housing & Mortgage Markets Roundtable May 16 at Courtyard by Marriott in Canfield were Samantha Aldish, agent with Keller Williams Chervenic Realty and president-elect of the Youngstown Columbiana Association of Realtors; Don Fatobene, senior mortgage sales manager at Farmers National Bank; Rob Kelly, mortgage loan officer and sales manager for Consumers National Bank; Jenna Koontz, agent with Howard Hanna Real Estate Services; Janeen Shackelford, agent with Brokers Realty; Marlin Palich, broker/general manager, Berkshire Hathaway HomeServices Stouffer Realty; Holly Ritchie, agent with Keller Williams Chervenic Realty; and Michael Stevens, co-owner of Coldwell Banker – EvenBay Real Estate and president of the Youngstown Columbiana Association of Realtors. The publisher of The Business Journal, Andrea Wood, led the questioning. Videographers Maggie Young and Steve Peterson shot the full discussion posted at BusinessJournalDaily.com with excerpts as well on “Three Minutes With.” Copy editor Dennis LaRue, edited the verbatim transcript as taken down by professional court reporter Mary Carney. Photographer Tony Mancino took photos of the participants as they responded.
The Business Journal: What are you seeing in the market?
Rob Kelly, Consumers National Bank: The market is a little volatile. Business is down. But still there’s business there. A diverse amount of clients. There’s no area demographically – it’s about the same percentages as it was a couple years ago.
Marlin Palich, Berkshire Hathaway HomeServices Stouffer Realty: … I’m also a commissioner on the Ohio State Real Estate Commission. This is almost my 45th year so I’ve seen a lot of changes. But this is one’s really different, especially the lack of inventory [houses to sell]. That’s a major concern.
Holly Ritchie, Keller Williams: Same thing. Whether it’s a $100,000 home or a $450,000 home, we’re still seeing multiple offers – three days on the market – over asking prices. They are appraising, but it’s still shocking, some of the numbers that I’m seeing. In every area, in every price range, multiple offers.
Janee Shackelford, Brokers Realty Group: I’ve been in the business going on nine years. I’m seeing more renters looking for properties because they’re tired of the rates going higher. I’m also seeing a lack of inventory all over, whether it’s cheap for investors, or flippers, in addition to the luxury homes as well.
Jenna Koontz, Howard Hanna Realty: I’m involved with the local, state and national board of realtors. I’ve noticed the same thing. Not one specific area that’s moving faster than others if it’s priced right. We’re still seeing sellers that want to jump the gun on homes that might not be worthy of overpricing and they’re sitting a little bit longer. We’re still seeing multiple offers and we’re seeing price increases on homes once they go under contract.
Samantha Aldish, Keller Williams: I am also the president-elect of the local board of realtors for next year. I agree with basically everything that’s been said, that we’re still seeing multiple offers on all levels, no matter the price. There’s a lot of cash floating around – a lot of cash buyers.
And with the rents going up as high as they are, more people are trying to start buying. Even the older people who downsized and rent. I have a lot of older clientele who are paying cash and buying a house because their rent is through the roof.
Don Fatobene, Farmers National Bank: I’ve been doing this for 35 years. The market is different than I’ve ever seen it. Just as you all have talked about: lack of inventory.
Cost of new construction is pricing a lot of people out of that market as well. …That’s where we’re seeing some of the problems on the appraisal side, that those homes aren’t [being valued for what owners think they’re worth]. So, there are quite a few borrowers out there. We see quite a few pre-approvals coming in. It’s just a matter of them finding something to buy.
Michael Stevens, Coldwell Banker: I’m president of Youngstown-Columbiana Board of Realtors and I sit on the state board. I’m approaching 30 years [in the business] and I’d say post-pandemic, I’ve seen in real estate situations that I haven’t seen in my entire career. The first quarter was very challenging. Since the pandemic we’re still dealing with a good old supply and demand.
The Business Journal: What happened? What caused all of this? Is this all pandemic-related? What brought about all this turmoil in the market?
Koontz, Howard Hanna: There was a lack of new construction since the last downturn. So we have a lack of inventory, whether it’s smaller homes under 1,000 square feet, even up to the larger homes. Over the last 10, 15 years, that lack of new inventory, moving people, shifting people around.
Then when interest rates bottomed out during the pandemic, everyone said, “This is a great time to buy because money is so cheap.” It created a ton of buyers. But the inventory was never there to begin with.
Palich, Berkshire Hathaway: I would have to agree with that. Before 2008, 2009, there was a lot of new construction. And then when the crash came, it almost came to a halt.
Therefore, people – baby boomers or others – if you want to sell that house, you want to go to a villa or a condo, there isn’t much available. So you just come to the point where you say, “I’m just going to stay where I’m at until something is available.”
That’s all through the United States, the lack of new construction. It’s pricey to build a new one. It costs so much, the materials.
There’s a lot of skilled labor. It’s just getting somebody to get that construction started and, hopefully, the lenders working with them. We used to have spec homes. We used to have developers who would develop. But we don’t have that anymore.
Fatobene, Farmers Bank: Right.
Palich: It’s hard to get the financing.
Fatobene: Yeah.
Palich: I don’t blame you [the lenders] either. You got stuck with a lot of inventory.
Kelly, Consumers Bank: We do have some construction going on. But it is limited. And the price is higher than what it was before the pandemic.
In ’18 and ’19, the economy was very, very robust. Unemployment was at all-time lows and people were buying. And that spurred extra buying and excess buying.
Now people don’t want to sell the houses when they have 2½% interest and downsize or upsize into a bigger house because rates are in the sixes now.
So they’re going from 2%, 3% to 6, 6½%. And a lot of the baby boomers have decided, “We’re going to stay here until we see what happens with this economy and it settles down.”
Shackelford, Brokers Realty: In addition, home prices have risen around the country. We’re drawing a lot of out-of-towners. I get California, the East Coast, Europe, all the time, investors looking to purchase here, to have rental properties, long-term investments. People are just picking on a map: “I want to come to this area because I can afford to live on retirement [income].” So you’re seeing a lot of that because our cost of living is way more reasonable.
The Business Journal: Let’s expand on that. Because we are concerned about repopulation of our area. When we talk about repopulation, we’re talking about young people or college graduates moving into the area. Are you seeing any of that? Or is it mostly retirees?
Shackelford: I’m mainly seeing retirees or just investors. Not young people at all.
Koontz: I’m not seeing too many young people. I’m seeing a lot of middle-aged families that want to be closer to their parents, to raise their kids.
Stevens: Yeah, you see a lot of that.
Koontz: And they’re able to work remote now. They have that freedom. But not too many postgraduates, grads settling [here].
The Business Journal: [To Aldish] What are you seeing?
Aldish, Keller Williams: I agree. I have younger kids and their friends are moving out of state for better jobs. But then, more people who have families are either staying here to help their elderly parents.
And then I have a handful of buyers who work from home and they’re middle-aged. That was more so last year. The last six months, mine have all been older people. And I’ve had quite a few people coming back from Florida.
Stevens: Yeah. We have an older population and that consists of their kids who have left and once their grandkids start getting to a certain age and working, family has been a large driving force when people move back. They want to be closer to Mom and Dad who are finally getting to that age. So I see the kids moving back compared to the parents moving to be with their kids.
Let’s face it. In the future it’s going to be the driving force in our local economy.
Ritchie, Keller Williams: During COVID, I probably had anywhere from seven to 10 families looking to buy a bigger home because their kids moved home. They either downsized, didn’t have a job or they were furloughed.
So older kids were moving home with Mom and Dad. Now the kids have a job, they’ve moved out. They’ve found either a rental or a smaller home to buy. But the parents don’t want to sell their big homes because there’s nowhere for them to go. They get stuck. You can sell. But then what are you going to do once you sell? There’s none – every single lower-priced home that I’ve sold goes into multiple offers.
That’s why they’re not selling [even though] they don’t need this big home they’re living in.
The Business Journal: We talk about lack of inventory. But what about the city of Youngstown? There’s plenty of inventory there. A lot of that might be substandard. But we’re not talking about substandard inventory. Are houses within Youngstown, in the inner city, selling for higher prices? Are they selling at all?
Shackelford: Oh, yes, multifamily.
Aldish: I’ve seen more people. Before you would get more calls from people who said they don’t want to be in Youngstown. They wanted to be in Boardman or Austintown. But I’ve had a handful of buyers who have given that up. You’re seeing more people in Youngstown.
Stevens: Even in Trumbull County, the same goes for Warren. You have your locations that are more in demand but we see the same thing in Trumbull County, too. In the Warren area.
Fatobene: Absolutely.
Stevens: But also there’s also a factor that’s a target for a lot of your investors. And there’s still a huge rental market.
Inventory is as high as it has ever been. And that’s where you see a lot of that market. It still has a lockhold on rentals.
Fatobene: Where we struggle is in some of the inner-city homes, whether it’s Warren, Youngstown, or outside of the area.
It’s the condition of the home and being able to finance those homes. That’s where we see some of the problems, that those homes have been either sitting or have been owned by an older family forever and ever and ever. That makes it tough.
Stevens: Which then gives a target for the investor.
Shackelford: If people qualify for conventional loans, they’re fine. Or, if they have cash or a 401(k) that they can pull from, they’ll go. If people take the time to update their homes just slightly and make sure the basics are covered – like no broken glass, no peeling and chipped paint – the properties can go.
But you get a lot of them that have foundation issues. They’ve set. They’re not updated. And that’s where people feel the value isn’t recognized. They are used to the 1,500-square-foot home for under $100,000 and now the average is up to $150,000.
But they’re not updated. And they have to put another $50,000 into it. They don’t have that other fifty to remodel.
Stevens: They don’t have the resources.
Shackelford: Yeah, they just don’t have the resources. And our economy isn’t the greatest. But it’s not the worst. The affordability factor has jumped a lot in the last couple of years.
Stevens: We all agree, too, years ago, especially the younger buyers, wanted turnkey. That’s all they did. Five years ago, if it was not new paint, not new carpet, the younger generation, the younger buyers didn’t have that vision.
And over the last three to five years, I’ve seen more of those buyers saying, “We can do this now.” A home can go on the market that needs paint and carpet and they’re overlooking that because of supply and demand.
Palich: We have to look at affordable housing. Some of the cities have done a great job. …
We talk about our youth drain. Again, that’s the economy. To me, that has something to do with what we’re going to do here in the Valley.
We talk about it but we need to get people back.
Our kids are going someplace else. If you go to Columbus, you see they’re building new homes left and right. Something’s going on there that’s bringing people and our college graduates and jobs, where that’s been not so good here.
The second thing is – we need to work with the state. One of the biggest things, again, goes back to affordable housing. Instead of tearing down some of these homes – which I understand they’re blighted and they need to – why are we not building, trying to work with Ohio Housing Financing Agency or somebody to get some funding in with down payments or working with the lenders to do that program to bring the people back into the city?
We talk about that but Cleveland does it. If you had been in Tremont [an inner-city neighborhood] in the past few years, it went from down here to way up here. It’s because people, even the younger people, are moving back.
They were educated and they’re coming back and they want that old house. They want that community.
If you own a house, you’re building wealth. And so we want to get people back into that community and build some wealth.
Our cities need to really focus on supplying some affordable housing, something that’s not $600,000 or $500,000. We need to look at our economy and what’s going to drive it. And we need our elected leadership to work together in a bipartisan manner and get jobs back here. You bring jobs back and then it all goes away.
Koontz: I agree but we also need to promote small-business owners because –
Palich: Oh, yeah.
Koontz: – you talk about Tremont and you talk about Columbus. And people want to be in certain areas because of the walkability, the access to cool restaurants, shops.
Palich: Absolutely.
Koontz: Fitness centers, different things. So we need to promote that. If we were able to do that in Youngstown, we would see a huge revitalization because there are so many really cool opportunities and land opportunities. We have people who say, “Oh, I want acreage. I want land. I want this, I want that.”
Houses in Youngstown have that because they tore down five houses on both sides of it.
Palich: And that’s why we have to get the jobs back.
Koontz: Yes.
Palich: And get the youth back.
Stevens: But don’t we feel that we’re on the cusp of this?
Shackelford: Slowly, slowly.
Business Journal: These are excellent points. We want to talk about younger buyers. How many younger buyers can’t get mortgages because they have high student debt?
Kelly: That’s not a huge issue. It can be an issue sometimes. As far as on the secondary market, we only have to count one-half of 1% of the outstanding balance as a monthly payment. That’s for Freddie Mac and other government programs as well. So it doesn’t have as great of an impact. They were in forgiveness for so long that they’re backpaying now. Or they’re going to be very shortly. So it hasn’t been an issue the last couple of years.
But moving forward, yes, the younger buyers who have lower down payments – 3%, 3.5% – they’re not able to go into these houses we were just talking about, these blighted houses, and they don’t have the funds to fix things. But the student loan debt I don’t think is a huge issue. It could be moving forward, though.
Aldish: It’s more that younger kids don’t know how to use their hands. So they aren’t as apt to fix things. I deal with a lot with the younger buyers, as well as my own children. They’re not taught financial responsibility, including saving money. Many of the people I’ve come across have the cash just sitting at home. And you can’t do that.
Or their parents have taken care of them, let them go through college for four years and they’re not working. It’s more about building their credit so that they can get to that point.
Shackelford: To piggyback on that: down payment. You hear of first-time buyer programs, which are available, but you have to qualify.
And you have something to put it toward. You can’t say just, “Oh, I’m going to get a program to help,” because they don’t have the money.
Or, they expect the seller to pay the closing costs. But you can’t negotiate when the market is slim, prices are higher, and you have competition.
You can’t go asking for $4,000 or $5,000 toward closing costs when the next person is offering to buy it as-is and in cash.
Ritchie: Right.
Shackelford: There’s no competition whatsoever.
Ritchie: Have you guys been winning with the Federal Housing Administration? Have you been winning deals for the FHA buyer?
Aldish: If they pay their closing costs. For about a month you were getting your closing costs but now it’s back to you’re not.
Kelly: Yeah. And the FHA product has definitely in the last year become more popular than what it was in the previous few years. I’m sure you see that as well.
Fatobene: So here’s what’s going to happen with FHA. Recently there’s been a lot of talk about the Fannie and Freddie adjusting their loan-level price adjustments based on credit scores and loan devaluations. What’s going to happen is FHA is going to become much cheaper. That person who has a 660 credit score, they’re going to find that FHA is going to be a much cheaper option.
So chances are you’re going to see much more volume than offers going through FHA. It’s not because they can’t qualify going conventional but that it’s going to be cheaper for them. More affordable to go with FHA.
Shackelford: Finding that FHA home is going to be the problem.
Aldish: Agree.
Fatobene: Yeah, as far as the standards, there’s really not much difference between chipping paint [and] going FHA.
But there’s really not a huge difference as far as what they look at in the home itself.
Stevens: Yes. Don’t you think what you’re saying is going to affect people who have a higher income and also buying a little bit more expensive home?
Fatobene: Yes.
Stevens: That’s going to be the point.
Fatobene: Sure.
Kelly: And FHA also did lower their monthly mortgage insurance premium – to make it more affordable.
That’s another thing. But as far as quality goes, the chipping paint is a big deal. About half the time you have to go get repairs on FHA.
Kelly: And realtors don’t like FHA.
Ritchie: Nobody does.
Kelly: Right.
Fatobene: Do you cringe when you see those offers?
Stevens: Not at all. Not at all.
Koontz: We just got spoiled during the pandemic when it was cash.
Kelly: But you know what? Fannie and Freddie have a very good 3% down program as well.
It’s that middle credit score, the 650, 660, 670 area where we have more of a challenge in getting approvals and then the mortgage insurance. Private mortgage insurance can be very expensive …
The Business Journal: We want to move the discussion to the rental market. You say investors are buying up rental properties. We see that in The Business Journal. We see some of the big apartment complexes and even condos are being sold. But we also hear from people in the inner city that the rents are outrageous. And that out-of-state people are coming in and jacking up the rents. Who are these people?
Stevens: We’ve seen people from New York, California, large cities – large investors, even global, South Africa. We’ve seen investors coming into our area from everywhere.
And they’re transitioning to our area because of the [capitalization] rate out west in California, or New York. The amount of money they have to spend for that investment to get a low cap rate, they can buy on the cheap here and get a lot better, higher cap rate in our area.
That’s what’s driving investors from all over the country and even all over the globe to our area. Because the property is really cheap. And the supply and demand have pretty much pushed those rents up. The market has driven that up.
The Business Journal: Because these out-of-town buyers came in and jacked them up?
Stevens: Well, no, no. Whether it was out-of-town buyers or local buyers –
I know a lot of people who own some large complexes locally and they’re locally owned. They’re getting the same rents. Outsiders didn’t drive it up. It was driven up by old-fashioned supply and demand. The market demands that. The rental market has been so overpopulated over the last couple of years because they can’t buy the houses. So the rental market has just blown up since the pandemic.
Fatobene: Yes. As far as affordable housing where you’ve got these out-of-town investors who come in and buy some of these older homes. Whether it’s Youngstown, Warren, wherever, and maybe that city’s residents don’t have the incentive to keep their homes up. So you’ve got true homeowners and the rental properties.
And, if you don’t keep those homes up to code, and you’ve got cities that don’t enforce their [housing] codes, that affects property values. It affects the purchase market.
Shackelford: I have seen some investors purchase and they’re always focused on the rent rate … whereas five, six years ago, they couldn’t care less, just because the property was reasonable. But they see the rent rate compared to their cities.
I usually have to remind them: You’re not going to get $1,000 for a one-bedroom. So don’t do that or your place is going to sit.
But if inventory is lacking, somebody needs a place to live. They’re paying these higher rates. So you’re having a battle on both ends. People want new places. They want it to be more modern or at least painted in the last 10 years. And some of these landlords don’t care. Luckily, the couple of investors that I do work with, they come into town quarterly.
They have a property-management company and they change the management companies when they don’t see them taking care of the properties as they would.
Or they’ve come in and they’ve remodeled them.
But if you just want to say, “I painted the porch and I want $1,500 for a three-bedroom in the inner city that used to go for $500 a month.” No.
Stevens: We got a lot of investors because property values, single-family homes, are so high. A lot of your local investors were selling their single-family homes because they could sell them for more than they could ever sell them before.
Ritchie: Right.
Shackelford: Yes.
Stevens: But on the opposite side, these out-of-town investors buy not only large complexes. They’re buying a lot of single-family homes. There’s a big market for single-family home purchases and these outside investors are renting them out. I’ve seen a big shift in that.
Aldish: [Building] more four-plexes and the larger [complexes show] more people in our area are buying the larger plexes.
Palich: I agree.
The Business Journal: But these out-of-town investors are not buying single-family homes in Canfield, are they, or, in the higher areas? It’s mostly in the low-income areas. Is that right?
Stevens: My experience has been not necessarily low. I’d say “moderate.”
Shackelford: Low to moderate.
Stevens: You have different ones. But my experience has been more mid- to moderate. They want stable real estate. And you may have the opposite. But that’s what I have seen.
Shackelford: I’ve seen a mix.
Stevens: They’re buying in good, stable markets. They’re not buying the $10,000, $20,000 properties. They’re buying $60,000, $80,000 single-family homes and renting them out for top dollar and getting cap rates which are a lot better than buying real estate in New York and California.
Shackelford: Right.
Stevens: Having to spend $1 million to get a 7% or 8% cap rate, compared to spending that same amount of money around here getting a 12%, 13% cap rate.
The Business Journal: This is great for business people. This is great for investors. But when we talk to folks like the people at Action, for instance, other social services agencies, they say it’s not great for people who live in the city of Youngstown. Or Warren.
Shackelford: One: They’re not used to change and getting them to understand that the market has shifted to a higher rate.
They don’t have the resources. They might understand the market has shifted but they don’t have that $1,000.
And that’s the sad part. But if you paid attention to how the economy has been going the last few years, you had to start making some shifts and changes.
Ritchie: Right.
Shackelford: To do some extra side hustles or figuring out the way you want to live, I want to live by myself. You may have to join with your sister, with your brother, with a cousin, to be able to afford a better home, a better quality of life.
Stevens: And we ask why is it so expensive now? Maybe the question is: Why was it so cheap five to 10 years ago?
Shackelford: Right.
Koontz: Agree.
Stevens: That wasn’t a great picture either.
Koontz: Compared to our neighbors in Cleveland, Pittsburgh and Columbus – where we have people leaving here, going and renting a place in Columbus. They’re spending $2,300 a month on rent.
Shackelford: Right.
Koontz: Which is unheard of here for a one-bedroom [apartment].
Stevens: And over the last three years, coming out of the pandemic, the Mahoning-Youngstown area was in the top 10 across the country in home-value increase. It was a 10% or 15% across the entire country increase. But you’ve got to realize we were 10%, 15% behind the entire country.
Shackelford: Right.
Stevens: So it was a combination of coming up with the rest of the nation and our area catching up. Which was the perfect storm. … It was a combination of we were so far behind and what has happened across the country.
Shackelford: I left in ’94. I was born and raised on the north side Youngstown. I left and moved to Columbus to go to Ohio State University. In ’94, I moved into my first apartment in Columbus and the rent was $350 a month.
That was like ’96. Years go by. I’ve lived in Cincinnati. I’ve lived in Cranberry Township outside of Pittsburgh right before I moved back here 10 years ago. I had a two-bedroom, 1½- bath townhouse that I owned but I paid $145,000 for like 1,000 square feet. I knew I was leaving corporate and changing career paths. I moved back home. I got half an acre, 2,100 square feet of house for $92,000.
Ritchie: Wow.
Shackelford: Sold my property over there for $156,000 in four days. And that was 10 years ago. I paid rent in Cincinnati of $850 for a two-bedroom one-bath eight years ago.
Ritchie: Wow.
Shackelford: So that price now is nothing compared to [today] and that’s our area finally catching up. But if you haven’t lived outside of our area, that is shocking.
Because you don’t understand Columbus rates, the Cincinnati rates, Pittsburgh, everywhere else but around here. We’re finally catching up.
You have to be able to change. The affordability, yeah, a two-bedroom [apartment] here now – $600, $700, $800 sounds crazy to us. But, the rest of the nation and the rest of the state – they’re paying it.
Ritchie: Yes.
Shackelford: They’ve been paying it.
Palich: It’s all relative. We’re getting people from Canada and overseas and wherever. There’s no attachment to those properties when they buy them. So we’re hoping that they will use a good property management company to keep them up and keep them in shape and do whatever.
There again, that comes to the local officials making sure: What are these investors doing? Are they just buying these properties and letting them run down and just renting them out?
The other thing: Have the wages in this area increased enough to cover what you were saying? If the wages haven’t come up to where they need to be, even though the rents need to be higher. But how are they going to afford it when the wages haven’t been increased either?
So we want rent to go $800. But you’ve got to pay the bills. And if you don’t have the income, that’s another problem.
[The dwelling is] great and maybe the rent should be $800. But have the wages followed suit? And if they haven’t followed suit, then how do you do that? They’re higher elsewhere but not here.I’m hoping that we police the cities. I don’t care what city it is – [housing codes] need to be policed. These out-of-state landlords buy bundles. [Houses and apartment complexes] are bundled and they buy them and are keeping rent up with what it should be.
The Business Journal: Every day we see a list of all the lawsuits that have been filed in Mahoning County and 80% of them — almost every day — are filed by the county treasurer or lenders — for defaults. So all of that goes into property tax sales — where these out-of-town people are buying bundles through tax sales. And it’s crazy.
Shackelford: Yes. I have friends in Detroit and Detroit has a plethora of properties.
But to control what you just mentioned. They only allow – you have to be a local. You’re going to have to live in that property. You can’t just buy 20 houses. I’ve driven through some Detroit streets and there are streets with properties available.
Just streets upon streets. It was amazing. Beautiful homes of brick, stone. Beautiful homes that need just a bit of love and revitalization and you have your neighborhood back. But to control that, you have to figure out which way to go. Our homes here have that availability if you get it at the right price. But sometimes the cost to update those homes is so outlandish. Or finding qualified contractors who will do so responsibly and show up – that’s another issue. Someone that you know is not going to take your deposit and run off. They are competent and affordable. But [the cost of] materials went up. Now you have a price of a home that used to be $20,000. Now that base price is $40,000. Fix it up; it’s going to take another $40,000.
People don’t have the money. So it’s a mix of so many variables that make it more difficult to save some of these properties.
The Business Journal: To Palich: You said you’re on a state board.
Palich: Yes.
The Business Journal: And we have leaders here of our local real estate board. How do you push for compliance on the issues that you think need to be dealt with?
Palich: With the National Association of Realtors and even the Ohio Association of Realtors – Ohio Realtors now – it’s something that we are very good at. We are very good at going to our politicians. They do listen to us. When we have bills that are in front of the state Legislature that would help, or national things that are going to help home ownership and private property rights, that’s one thing that our National Association of Realtors and Ohio Realtors do very well, promoting and trying to implement what everybody’s been talking here.
Through NAR, I am a coordinator to one of the congressmen, U.S. Rep. Bill Johnson, [R-6, Ohio] and I can tell you, Congressman Johnson always listens. When we were having some issues with financing over in East Palestine, I called him on his phone, and, boy, his office was right on it. They really did an amazing job. I have to give kudos to his staff.
We were having appraisers who didn’t know what to do and [his staff] got us in contact with HUD and tried to get answers.
Stevens: That’s going to be more impactful on a local level.
Palich: Yes.
Stevens: It’s going to be at the local level. And even on a larger scale. A perfect example is my company has an account for HUD. So one of our agents sells HUD properties.
HUD does not rehab the entire house from top to bottom before it goes back on the market. Every single home that HUD takes back and forecloses on – we have 15 properties right now that agent is doing. He’s rehabbing all 15 properties: new paint, new carpet, new everything.
And these are properties that you would look at as a real estate person and say “OK, this is not fiscally responsible for HUD because they’re putting more into the properties than what they’re worth.”
But one of their motivations is to revitalize the neighborhoods. So that’s coming straight from HUD. Whether it’s a mid-range property that they’re completely rehabbing or whether it’s a very low-price market area, they’re still going in and putting tens of thousands, completely rehabbing, making the homes beautiful regardless of the investment and the return, to stabilize the market. That’s happening in HUD right here and on a national level.
Fatobene: There’s a difference there, too, though. Those are homes that HUD has taken back. The homes that you had talked about where they’re going up for sale for taxes – those are different. In those homes, chances are they aren’t going to be financeable just because of the conditions. And then the only option there is for either a cash buyer or for the investors to come in and buy them.
Stevens: And that’s the difference with the HUD homes and the other financial national and local financial institutions.
Fatobene: And that made a difference back in ’08 and ’09 when you saw the huge glut of foreclosures. There were a lot of banks that would sit on houses.
Stevens: You and I were there. … I was the president of REO [real estate owned] for First Place Bank.
Fatobene: Yes.
Stevens: And let me tell you, bankers or financial institutions did not want to hear me. I would sit there and say, ”Let’s put $10,000 into this property.”
Fatobene: Yes.
Stevens: I could make you $20,000 or $25,000. And that was unheard of.
Fatobene: Yes.
Stevens: The mentality was, Oh, my God. We can’t do that!
Fatobene: Yes.
Stevens: But here we are today. Not only did they adopt that while I was with First Place Bank and other financial institutions, with the REO, now more banks or more financial institutions are doing that than ever before.
The Business Journal: What about flippers? Are there more flippers today?
Aldish: We do some flipping. We do about six a year. The same thing as new construction. People think, “Oh, we can throw $20,000 at this.” There’s all different levels of flippers, whether they put lipstick on a pig, slap some paint on it, fix a cracked window, and throw it on the market. We don’t do that.
We go in and fully rehab it. If it’s got water issues, we are excavating. We’re trying to fix the houses that have foundation issues, jacking them up, fixing it. We do it right.
Again, the costs that we’re putting into the house, people are like, “Oh, you bought it for $50,000 and now it’s $170,000. But we truly, legitimately, have put the time and money in.
One house had 7½ inches of bow in the wall. We jacked the house up, put in a new basement.
Everywhere you go, there’s going to be that one that’s out to make a quick dollar and those don’t flip quickly. And there are some quality flippers that do the work.
That’s where you see that they bought it for $50,000 and now it’s a $200,000 home. More are trying to make a quick dollar.
Ritchie: Right.
Shackelford: Yes.
Aldish: Rarely do people do flips as we do.
Koontz: When the market was really good and everyone was home watching HGTV, they’re out of their job or whatever during the pandemic. They’re like, “Oh, we can get into flipping houses.”
It looks easy. And they do the lipstick-on-the-pig job. And, you hear these horror stories of people moving in only to find nothing was fixed. They have sewer backup or whatever the case may be.
So it is cultivating good. Real estate agents help investors make smart business decisions and also guide them to rehab things properly.
Maybe the next frontier is the homes in Youngstown that need a little more love instead of staying in the suburbs where it was a safe investment or they thought they were going to make a larger return on their investment. Marlin [Palich] does a great job bringing Bill Johnson in and to our local board to speak on different issues.
Maybe we have to do a better job to reach out to different representatives to help bring grant projects in to different investors and different builders to help rehab the existing inventory. Make it affordable.
The Business Journal: [To Palich:] What’s happening in the housing market in East Palestine? The people close to the tracks? Aren’t a lot of them rental properties?
Palich: Well, I was looking more at it when we were having issues with appraisers.
Fatobene: Right.
Palich: How do we value those? Let’s say one of these two lenders sent out an appraiser and the appraiser goes, “Well, I don’t know. It wasn’t designated as a FEMA disaster area.”
What do we do when we appraise it? How do we tell the lender who’s hired us what the value is and what it isn’t?
We were looking more for guidelines and direction, and I talked to HUD but it doesn’t seem to be an issue. …
I pulled up some statistics about two weeks ago about houses that were listed and sold.
Now, I’m sure if it’s closer to the site [of the train derailment], there are going to be more issues than if it was out a ways from where that happened.
I want to get back to the Statehouse. They are doing a great job. And I have to give credit to Ohio Realtors and our local people trying to do just what Jenna [Koontz]said.
We’re trying to get a savings program for these young people to put money away for down payments so they can have this interest-bearing account – put it away. But it has to be dedicated to housing so they can get a tax write-off and whatever.
Those kind of things help to promote and get everybody into housing. Again, affordable housing.
And that deals a lot, too, with inner cities. Let’s fix these houses up. Ohio Housing Financing Agency, for example, works closely with them. They have down-payment assistance programs, closing-costs programs. The lenders have to get involved. The opportunities are there.
Those are the kind of things that inner cities can look at and work with what we have. Our state government is trying to help a lot to make Ohio great.
Again, the cost of living here is the best. You can buy a nice home and you’re close to hospitals. So it should be an area that should be a draw to people.
The Business Journal: Let’s get out our crystal balls. What’s going to happen? What’s going to happen in this marketplace, not only with home prices but mortgage rates?
Fatobene: Mortgage rates have become stable. People were concerned about fixed rates in the double digits. They just never got anywhere near that.
You’ve probably seen that in the last couple months. You get a little fluctuation, a quarter percent here or there.
Kelly: Mortgage rates are affected by the 10-year Treasury bond. More so than anything. Not the Fed Funds rate. So last time when the Fed raised it, mortgage rates actually came down the same day.
We’re seeing some volatility. But nothing major.
They’re settled somewhere in the sixes.
Fatobene: Yes.
Stevens: I keep referencing Dr. [Lawrence] Yun. He’s the chief economist for the National Association of Realtors. I listened to him in Chicago early last year and then I listened to him again in Orlando in November and then earlier this year.
What he’s predicted has been happening. So I keep referencing that. And we saw the big spike. He continues to think that it is stabilizing. He likes to call it a correction. What we’re going through right now is a correction.
We have an entire generation who thought money was free. And we went from free to very expensive. So there was a lot of shock.
Kelly: Quickly, too.
Stevens: Very quickly.
Fatobene: Yes.
Stevens: We’re going into the second quarter with more of a correction, more of a stabilizing. Yun even predicted the interest rates were going to go down. They should stabilize by the end of this year going into next year. High fives: He said 5.7%, 5.8%. This is coming from the national economist. And once that happens, 2024 really sets up for a good strong year.
Fatobene: I remember the days when people would kill for 6%.
Palich: I remember selling a house for 21% interest fixed rate [in the early 1980s].
Ritchie: Wow!
Shackelford: Wow!
Palich: So, what’s 6%?
Fatobene: Yes.
Stevens: Well, it’s why an entire generation thinks money was free.
Palich: That’s what I’m saying. And, when I bought my first house a long time ago, I had to go adjustable … because the fixed rate was 14%. So I went on an adjustable rate. Those adjustables were great.
I never had to refinance because as the rates came down, my adjustable worked. These things go in cycles.
And so, it will correct and it is correcting.
Stevens: And the new norm is going to be OK. Once homebuyers realize that’s the norm, it’s going to be fine.
Palich: Because people have to deal with that adjustment.
Koontz: Yes, I think we’re still going to have a shortage, too. The absorption rate in Mahoning County is just a little over one month of supply. So it’s still a sellers’ market across all price points.
Stevens: Supply and demand is not going to go away.
Shackelford: Right.
Stevens: Even once the interest rates correct themselves and we get back a little bit of what we lost during this correction and people getting priced out of markets, supply and demand is not going to go away.
Fatobene: Yeah.
Stevens: We still have that issue.
Aldish: I tell a lot of people: Well, it’s 6% now and you’re going to wait and wait and wait for it to go down. But what if it goes up?
If it goes down, you can refinance in a year, in two years. So I just keep driving that home: to just refinance.
Kelly: Date the rate. Marry the house. Right.
Fatobene: Yes. There are a lot of financial institutions, us included, that are running programs now that are giving homebuyers two years and they can refinance down the road at very limited closing costs as well.
Koontz: If we had gone back to 2019 and the pandemic hadn’t happened, we probably would have been around this interest rate anyway.
Shackelford: Right.
Koontz: It’s where we were heading.
Ritchie: Right.
Koontz: So, it went down.
Stevens: It may have happened over five years instead of five months.
Koontz: Yes. It’s sticker shock. But this is where we would have been anyway.
Stevens: So it’s been the perfect storm.
This goes all the way back to so many factors. Back to the housing crisis [2007 to 2010] and coming out of the housing crisis. It’s been the perfect storm. But not so perfect storm.
Shackelford: Yeah. It could have been worse.
The Business Journal: As far as multiple offers and people getting way over their listing prices, do you see that continuing?
Shackelford: Yes.
Ritchie: I do. Because there’s no inventory.
Shackelford: Not as drastic –
Stevens: Not as drastic.
Shackelford: – as it was two years ago. I saw some insane offers.
Palich: I agree.
Ritchie: Yes.
Shackelford: Fifty thousand over or I’ll buy you a Tesla and I will get you a vacation. It was crazy.
Stevens: It went from stupid to strong.
Fatobene: Yes.
Ritchie: When the supply is low, the demand is high, and the supply is very, very low right now. It will continue.
The Business Journal: Do you see more builders getting into the marketplace and more construction? Because during the Great Recession, a lot of them went out of business.
Palich: That’s right.
Stevens: The problem is the infrastructure costs. We’ve gobbled up a lot of the land that was residual from the housing crisis.
Look up what it costs to put square foot into infrastructure. Until the big huge investors who want to invest $1 million into the infrastructure of a large development – and have the comfort level that they’re going to match that price point, that’s what’s going to happen.
We need some stability in that whole industry. It will come. Just getting an investor to pay that much money [is hard]. The cost of infrastructure is astronomical.
Ritchie: Right.
Aldish: And there’s still the challenge of getting materials.
Stevens: You see the cost of new construction. New construction cost is $600,000 to $800,000.
Fatobene: Now you’re talking that 1,500-square-foot house that 10 years ago you might have built for $150,000…
Kelly: Three times that probably now.
Koontz: We have two ranch homes that we’re building in Poland, six months apart of digging a basement. Already we’re $35,000 higher than we were six months ago.
And they’re the same size, same blueprint. Just on a different block.
Shackelford: People who want to build are now saying, “That costs too much.” They’re buying the larger homes in the inner city. Fifth Avenue: I sold five houses in a year. And the area went from $220,000, the highest it had been in 10 years, to $150,000. They’re buying them up. And they’re migrating back from the suburbs because they can’t afford the $500,000 home. And they’re moving back buying $100,000 to $150,000 houses. And putting some money into them.
So you have this: If you’re worried about schools, you have the open-enrollment system so that they can send their children to any school that they want to. So that’s not a factor.
Getting that large home with the character, the charm, the brick, the stone, whatever. People are opting to say, “I’ll go back into the city and go into some of the poorer areas and revitalize them and move into those instead and save money.”
And then you also have inflation. The cost of living overall. I don’t have any kids. I don’t know how people are feeding their families.
The Business Journal: Let’s wrap up with some final thoughts from everybody.
Kelly: We’re in a healthy market overall. We’ve said this many times today: Inventory is the issue. Does that ease itself? It’s going to take some time. It’s not changing. But who knows when?
To modify the question: Final thoughts about the local economy? Because we hear about electric vehicles and Ultium and things happening here. Do you see any improvement?
Kelly: Over the last 10 years, our economy has been relatively strong. We need more jobs. But we also need to have the people here willing to work and go to work and able to get the higher-paying jobs.
Palich: The real estate industry leads the economy. How the real estate industry goes, so does the economy. So when it’s thriving, people buy appliances. They have painters come in. They buy carpet. It’s important that we understand that: how important home ownership is.
The one thing I would like to see again – and I don’t want to be political but we have to: We’ve gone through a lot in this Mahoning Valley. And we need to work, collaborate, work together to bring jobs back in and bring our youth back in so that we can see more growth.
[Elected and business leaders] are trying but we need to try harder. Our leadership needs to implement whatever they can do, whether it be federal or state or whatever, to work about bringing jobs in and helping build affordable housing and things like that.The Mahoning Valley has gone through a lot. I’ve seen when the steel mills went away. I do think we’re getting stronger.
Ritchie: Same thing, jobs. We need jobs to keep people in the area. When I was a senior in college, we had all kinds of job fairs. People were coming in. My first job was in Atlanta, Georgia, because I had a degree in marketing.
What do you do in Salem, Ohio, with a degree in marketing? Not much in the ’80s. So I moved to Atlanta. And I was one of the hundreds of thousands of kids who moved back home once they got experience. Nobody wanted to hire me because I didn’t have any experience.
I’m the classic story. You can’t wait to get away and then you get away and it’s like, oh, it’s not so great here. You want to move home.
Shackelford: I want buyers to stay ready so they don’t have to get ready. Prepare for whatever it is you want in the future and it will happen when it’s supposed to.
Sellers, put effort into making your home better. You’ll be surprised at the outcome.
Koontz: I would love to see more opportunities for more jobs in this area.
Also, finding builders and investors willing to work with realtors in the area to foster good programs to find grants for more affordable housing – because there is a need for it. Definitely.
We can’t rebuild the same house at a cheaper price. So we have to find other alternatives.
Aldish: More inventory. More jobs to come back. By the same token, I’m always on the go and a lot of people need to come back to work. Whether it’s food
service, going to the grocery store, there’s still a huge shortage.
Even in the health care industry, they’re swamped. Or you have all these nurses going out but
they’re getting paid triple to go travel three states away.
Put everybody back to work here or encourage them and stop giving out benefits for them to sit at home. And I wish for the price of construction to come down.
Fatobene: We’ve talked about home affordability and where we rank as far as being a very, very affordable area. Quality of life, quality of living to keep young people here. Whether it’s entertainment, whatever it is, we’ve got to focus on those types of things as well.
The supply issues. Until you’re able to build low-cost homes – I don’t know how you solve that. The costs are what the costs are. Right now it’s just not realistic.
Stevens: My glass is always half full. I’m very optimistic. I really am. I’m very excited about the Valley. … It’s going to take a lot of work. We’re on the cusp.
Big companies do a lot of study and spend hundreds of thousands of dollars studying our area.
Why else would Meijer come here? You see more of that.
Our area is prime for the picking for development: manufacturing, industrial, all aspects. Because, back to why investors are coming here and buying rental homes, because their cap rate is better.
Land here is cheap for these manufacturers to buy and build. And the good thing about it, it’s going to be long-term. This isn’t going to be short-term. We’re talking decades.
Pictured at top: From left are Michael Stevens, Don Fatobene, Samantha Aldish and Jenna Koontz.
