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– Scott Hall (President of Scott Hall Remodeling)
The National Association of Realtors (NAR) has ranked the Central Ohio housing market as one of the 20 strongest in the country. A number of factors could be driving the market, but job growth appears to be the most significant. However, some economists fear that the job growth engine could be sputtering, which raises some concerns about the long-term direction of the housing market.
Job Growth Concerns Overstated
A recent report from PNC Financial Services Group Inc., found that the job growth is expected to slow slightly in 2015. They reported that the number of jobs in Central Ohio increased 2.3% in 2014, but expect that figure to drop to 2.2% this year.
The figure is not very significant, but still raised some concerns among economists and real estate agents. Some fear that deceleration in the job market is a leading indicator that the economy is losing steam, which would threaten the direction of the housing market.
However, experts from PNC doubt that there is anything to be worried about. Mekael Teshome, an economist with PNC, responded to this question with stark optimism. “No, not at all,” Teshome said. “I think one of Columbus’ advantages is it’s not a boom-and-bust economy. Settling into a normal rate of growth is not entirely bad, especially with the unemployment rate fairly low. It’s really actually a good thing – we’re at cruising speed.”
Teshome acknowledged that job growth declined slightly in the third quarter. However, he said that slower growth was expected. He also pointed out that job creation was actually stronger than PNC predicted earlier this year.
“Columbus will remain among the growth leaders in the Midwest, even as the region’s economy settles into its long-term growth rate,” read the PNC report, which bodes well for the direction of the housing market as well.
Housing Market Likely to Continue to Rise
The housing market could face a setback if job growth decline too much, but a fallout in the job market doesn’t appear to be on the horizon. The NAR believes that housing demand will continue to rise for the foreseeable future and nothing in the PNC report indicates otherwise.
While job growth may decline slightly over the next few months, it’s likely to still surpass the national average. Housing demand will probably continue to rise if it continues to outperform neighboring states, especially if more people relocate to Ohio for better career prospects.
The Ohio housing market had been growing tepidly between 2008 and 2014. However, recent reports from Zillow shows that the market is finally starting to recover. Experts from Housing Predictor feel that local real estate investors should be optimistic about the long-term direction of the market.
Zillow reports that demand for housing in Ohio increased by 1.7% in 2015. This is stark improvement over prior years, while the market had been stalling. Zillow’s research also predicts that the market will grow by 2.6% between May 2015 and May 2016.
There appear to be a number of factors that are fueling the local housing recovery. The strengthening job market is probably one of the biggest reasons for the turnaround. The unemployment rate in Ohio was about 10% in 2010, but has since dropped to 5.6%. The state could reach full employment by the middle of next year if the economy continues to improve at the current pace.
Demand for housing will continue to grow rapidly as the job market continues to improve. Ohio has proven to be home to one of the strongest economies in the country, so growth is expected to continue through the next year.
Some temporary problems may hamper the state economy to some degree, which could curtail housing market growth. Precipitation has been heavy this summer, so the farming industry hasn’t been as productive as possible. Economic growth may accelerate if weather patterns change before the fall, which could spur the housing market for the future.
The Cleveland Index shows that housing demand in the Cleveland area has grown more rapidly than most other areas in the state. The demand for housing in
Construction and Sales of New Homes Still Menial
The housing market as a whole is proving to be rather robust. However, demand has primarily increased in areas with older housing units. Construction and sales of newer homes have failed to increase to nearly the same degree.
Housing starts could pick up in the coming year if prices rise faster than originally anticipated. Many experts have raised concerns about affordability as prices rise with demand. However, David Blitzer, chairman of the index committee at S&P Dow Jones Indices said that prices will eventually begin to taper out, although he didn’t specify whether the deceleration would be driven by increased supply.
“Over the next two years or so, the rate of home-price increases is more likely to slow than to accelerate,” Blitzer wrote.
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