Low Supply Drives Pricing in Housing Market
YOUNGSTOWN, Ohio – The co-owner and broker for Kelly Warren & Associates, Kelly Warren, shares the story of a recent listing in the Cornersburg district of Youngstown.
The house, listed at $129,000, had 50 showings over one weekend and its owners received 12 offers, she says.
“It sold for well above asking price and it was only on the market for three days,” she says. “Had we taken the first offer, it would have only been on the market for four hours.”
The swift sale reflects today’s market, one driven by low inventory and rising sale prices, as reported by Warren and other area real estate professionals.
Others contacted for this story were Sue Filipovich, broker/owner at Burgan Real Estate, Boardman; Fontineese Green, a real estate agent with Berkshire Hathaway HomeServices The Preferred Realty in New Castle, Pa., and president of the Greater Mercer County Association of Realtors; and Alicia Kosec, vice president and east regional sales manager in Ohio for Pittsburgh-based Howard Hanna Real Estate Service.
SUPPLY AND DEMAND
“We have a demand issue. We have high demand and not enough inventory,” Kosec says.
“We are still at record low inventory,” Green says, so market activity in Mercer County is low.
Neighboring Lawrence County is just as competitive, the Preferred Realty agent reports. Buyers are still out looking to buy. But a house is gone as soon as it hits the market.
One recent property in Hermitage, Pa., received 10 offers and sold “for well over list,” she reports. Sale prices in that Mercer County city are up nearly 40% from what they were two years ago, according to Green of Berkshire Hathaway.
“The pandemic really didn’t shut anything down for us,” she says. “If anything, it made the market hotter.”
The number of houses sold is down but sales volume is still rising, says Filipovich of Burgan Real Estate. Inventory on average is about a month and a half supply.
“A healthy market is when there’s six months of supply,” she says. “Now it’s definitely unbalanced with it still being a seller’s market.”
Kosec, who oversees 15 Howard Hanna offices in an eight-county region that includes Mahoning, Trumbull and Columbiana counties, attributes the low inventory in part to homeowners who probably should sell but haven’t. They are remaining in houses that are too large for how they live because they don’t have anywhere to go, since there have been few new houses built since 2008.
“Before the crash, everyone was building these huge, big McMansions,” she says. Few buyers are interested in such properties now.
Many of the builders who erected them were overleveraged and went out of business with the downturn in the housing market that accompanied the Great Recession, according to Kosec.
In addition, supply chain issues, the rising price of materials and the lack of contractors are contributing to the dearth of new housing construction.
“They are building but just at a slower rate than the last time we had a big housing boom,” Warren says. Some new housing developments are in the works. “But we’re not seeing them as quickly and much as we were seeing that in 2001 through 2006,” she says.
Builders might be cautious about having so many spec houses up so they wouldn’t be “stuck again” if the market shifted significantly.
“We had so many builders go bankrupt at that time period,” Warren says. She also points to increased supply costs, as well as the higher price – and scarcity – of labor.
As a consequence of the low supply, price appreciation is up 13% year over year in Poland, for example. Properties on average are getting five or six offers; some are getting 16, Filipovich reports.
In the tri-county area, a house that went for $100,000 three years ago could go for $145,000 today, or upward of $160,000 if it is in “superior condition,” Filipovich says.
“Buyers are having to make very quick decisions once a house goes on the market,” Kosec says. “If you want it, you need to go over asking. You need to bridge an appraisal gap if there’s any. And if you ask for an inspection, chances are you’re not going to get the house. … If we had more houses to sell, we wouldn’t have as big of a problem.”
The “bottleneck” in housing supply is in the baby boomer/empty nest segment of the market, she says. In that regard, the Mahoning Valley is catching up with the rest of the world.
“Our prices have been low for so long that we’ve been overdue for a pricing correction here,” Warren says. “Part of it is just supply and demand. There’s been so little inventory that the prices on the existing homes are just climbing and climbing.”
Sellers are in what Kosec describes as a “great position.” She notes some owners who have secondary houses at Lake Milton are selling their primary houses and remaining at their lake properties until a property becomes available that is right for them. Others are relocating to houses they have in Florida or the Carolinas, or moving in with their offspring until they find something.
DEMAND FOR UPDATES
Location is the top attribute buyers are looking at. But they also want modern properties with updated kitchens and bathrooms, Green says. She recalls taking a prospect into an otherwise “beautiful property’ with hardwood floors. But the kitchen wasn’t updated and the colors deviated from the neutral palette most buyers today are looking for.
“Although it was a great price, it didn’t appeal to her because it didn’t have upgraded features and she didn’t want to do the things that would upgrade it to her standards,” she says.
Another feature that the agents and brokers report many buyers are looking at is home office space.
“People are still working from home and looking for that extra bedroom or that designated office space,” Green says.
Filipovich agrees: “Just about everybody, whether they have a job outside of their home, whether they’re retired, they like to have an office space.”
Kosec also sees greater demand for office and flex space brought about by the pandemic. “You have a lot of people who are not working in offices full-time anymore. They have a mixture of part-time at home, part-time in offices. And some are completely mobile.”
“It really depends on personal opinion,” Filipovich says.
In addition to upgraded kitchens and baths, the top priority in terms of upgrades is a basement that doesn’t take on water. It’s an issue that is encountered frequently because of the age of local houses.
“That’s an expense either on the seller to get their home sold or the buyer to accept it as is and fix,” Filipovich says.
Still, she says, buyers are becoming less picky regarding cosmetics as long as big-ticket items such as the roof, furnace, basement and electric are functional.
Younger homebuyers are “buying anything,” Kosec says. They are purchasing ranches where they weren’t interested in them, as well as buying colonials with 1980s décor and redoing them.
People aren’t always getting what is on their wish lists. More contemporary looks are popular today, with clean lines and natural wood, whites and grays, and open floor plans where the kitchen and great room are open to each other “so you can cook while you entertain,” Kosec says.
The heavy, dark, Tuscan-European look that was popular in the early 2000s has fallen out of favor, she adds.
“Ranch homes are very popular but people don’t realize it’s more expensive to build a two-story because you have more concrete, more roofline,” Kosec says. In addition to updated master bedrooms and baths, homeowners with children also want spaces for them such as finished basements and bonus rooms.
BEYOND THE ‘BURGS
Traditionally popular areas in the Mahoning Valley – Boardman, Canfield and Poland in Mahoning County and Howland and Cortland in Trumbull county – remain in demand, but buyers increasingly are looking elsewhere as well, the agents say.
Filipovich is seeing “huge interest” in Youngstown’s west side as well as in Mineral Ridge and Girard.
Houses on Youngstown’s north, south and west sides are selling “pretty quickly,” Kosec says.
“They’re liking the ranches that are in the Brownlee Woods area,” she continues. Markets like Campbell and Struthers that at one time people left for the suburbs are seeing renewed interest. To the south, people are moving into Columbiana and Salem.
Some buyers are taking advantage of areas in the city like Cornersburg that are surrounded by open enrollment school districts, Warren says.
Hermitage remains attractive in Mercer County but people also are looking at Sharon, Green says. “From what I understand, downtown Sharon is going to be an amazing attraction for [Mercer] county” following recent hires to the city’s development staff, she says. “I’m anticipating both residential and commercial spaces being renovated there.”
In Lawrence County, Neshannock Township has always been desirable because of factors such as its walkable spaces and school district, Green
Filipovich says people often ask her when the housing bubble will burst. “Here there are less bubble problems than in other areas,” she answers. “We’re still not seeing that here.”
Pictured at top: Kelly Warren, Sue Filipovich, Fontineese Green and Alicia Kosec.
Copyright 2022 The Business Journal, Youngstown, Ohio.