Hot housing market leaves Columbus home buyers in a race. ‘Never seen anything like it.’
Mac McKnight and his wife, Ansley, wanted a 4-bed, 3-bath, 3,000-square foot home in midtown with a playable backyard and a flat lot for their two little boys.
The hunt for that perfect house, he said, has been anything but easy. McKnight, 40, grew up in Columbus and last lived in the city eight years ago. He’s returning for his job with Synovus, and the couple has had to take short trips to the city to look at homes.
“(It’s) a lot of hunting and pecking and a lot of due diligence and knocking on doors,” he said.
Other buyers in the Columbus market are experiencing the same things. Historically low-interest rates make purchasing appealing, but the supply of available homes just isn’t there — a problem apparent even before the COVID-19 pandemic. Adding to that difficulty, would-be sellers are staying put despite market conditions.
The city’s tight housing supply is a complicated picture — a blend of unique, local factors and national trends. The result: a dash to gobble up whatever is on the market.
The data on Columbus’ real estate market
Home prices in the Columbus and Phenix City areas are up year over year. Homes are spending less time on the market, and supply is down, according to MLS data from the Columbus and East Alabama Boards of Realtors.
As of April 2021, the average sales price for a home near Columbus is $206,132, up 9.7% from 2020. Homes are on the market for an average of 57 days, 18 fewer than last year.
In the Phenix City area, the average price is $202,054, up 16.4% from last year. Homes are on the market for an average of 50 days, 58 fewer than 2020.
Housing supply is down as well. There is a one-month supply of homes on the market in the Columbus area, down from a 2.5 month supply last year. In Phenix City, there’s 0.9 months supply of homes, down from two months worth in April 2020. Those figures represent the number of active current listings divided by the average number of homes sold.
Data for Georgia includes Muscogee, Harris, Marion, Talbot and Chattahoochee counties. Data for Alabama includes Lee and Russell counties.
It’s part of a national trend. The New York Times reported earlier this year that the number of available homes has fallen steeply in cities across the country. For example, available homes for sale in Atlanta fell from more than 20,000 before the pandemic, to fewer than 9,000.
The signs were there before the COVID-19 pandemic, said Paul Fincher, general manager for Columbus real estate company Coldwell Banker, KPDD.
Fincher said his firm started to see signs of the market tightening 24 to 36 months ago. Demand is up, but not significantly. What consumers are feeling now is that lack of supply relative to demand.
Supply began decreasing in 2013 and continues to project downward. The 2008 housing crash contributed to an oversupply of homes, and buyers eventually began to eat away at the stockpile. Nothing substantial replenished that supply, he said.
“It’s something that’s been happening for quite a while now,” Fincher said. “Consumers are feeling it, and you’re having multiple buyers compete for houses when you didn’t really have that happen three years ago.”
What it’s like to buy a home in Columbus area right now
Millennials, young people and those drawn to the city by Fort Benning and other major employers play a role in the city’s housing market. Millennials make up the largest share of homebuyers in the nation, according to the National Association of Realtors.
The pandemic also brought some younger home buyers into the market sooner than expected. Nearly one-third of millennials said COVID-19 pushed them to begin house hunting earlier than they had planned, according to a survey conducted by data company Clever Real Estate of 1,000 people planning to purchase a home in the next year.
Daniel J. Hill, an Army retiree and realtor at Bickerstaff Parham with more than two decades of experience, said half of his clients are young adults looking for their first home, and the other half are older residents looking to take advantage of low interest rates and move up into their dream homes.
As a result, the homes on the market move quickly, and if you want to live in a specific neighborhood, it could take a while to find the place. A few of his clients have asked about housing outside Columbus’ limits, but Phenix City has a similar housing shortage.
“If a property comes on the market today, it’s immediately shown. Typically, if the house is in good condition, there are offers made the same day,” he said. “I’ve never seen anything like it.”
The consequences of the supply problem extend beyond possible bidding wars or long waits. Buyers are paying higher prices for homes built during the pandemic as construction prices increased. In some cases, soon-to-be homeowners are willing to pay above the house’s appraised value. It’s affecting residents at a variety of income levels.
Trends suggest half of the 25 houses on 4th Avenue, a part of Neighborworks Columbus’ Highland Homes project, will be filled with low to moderate-income buyers, said Cathy Williams, the nonprofit’s CEO and president.
The group serves low to moderate-income residents and must use roughly $10 million of private/philanthropic and city funds to build 23 new homes and rehabilitate two historic houses before December 2021. Seven million dollars came from the U.S. Department of Treasury’s New Markets Tax Credit program and less than $200,000 came from the city, Williams said.
It’s part of the needed work to ensure success and growth in the city’s Mill District. At the intersection of 4th Avenue and 35th Street, a two-story blue house now sits in the place of a two-story concrete building frequented by drug dealers, Williams said.
Four of the new homes are capped for low to moderate-income buyers — roughly $54,000 for a family of four, Williams said.
“It was very densely populated with very low income and very substandard housing,” she said. “We were very deliberate about it. Very deliberate.”
But the pandemic has forced Neighborworks to raise the prices on the homes as construction prices increased. Homes that were once projected to be $110 per square foot are now $120 a square foot. Nationwide, a surge in lumber prices over the past year has added $35,872 to the price of an average single-family home, according to the National Association for Home Builders.
“Costs have gone up 20% which means that our net benefit that we can pass on to our low to moderate-income families has decreased, and that’s disappointing,” Williams said.
Williams said another local factor is partly to blame for Columbus’ tight housing supply — homestead exemptions. It freezes the assessed home value, which is then taxed against the millage rate.
This, coupled with a drop-off in building, helped create the crunch. It restricts housing mobility. Families who bought homes decades ago and are now looking to downsize might not leave because of tax increases, she said.
“They’re saying ‘we don’t need all this,’ but if they move and downsize to something that’s more reasonable, like maybe 1,400 square feet, they’re going to be paying three times as much in taxes,” Williams said. “So they don’t move.”
Ben Dodds, who owns Dodds Appraisal Company, said limited sales numbers have, at times, made it difficult to prove the higher prices in the current market.
When determining the fair market value of a home, Dodds looks at recent sales prices for three homes. If the appraised value is lower than the sale price, buyers will only be able to receive a loan based on that lower amount.
Buyers could come out of pocket to meet the difference. But for people with financing almost all of their home purchase through a loan, it spells potential trouble.
“If they are going 90, 95, 97% loan to value, there’s not a lot of wiggle room in there for them to purchase the property above appraised value,” he said. “We do not create value. We report it.”
When will the market change?
It’s going to take an increase in supply or a drop in demand for Columbus’ housing market to balance out, Fincher said.
A backlog of foreclosures from the COVID-19 pandemic could enter the market, increasing supply slightly. Interest rates could increase and lower buyer power, suppressing demand. But don’t expect any drastic changes soon, he said.
“I think we’re going to continue 2021 with lean supply,” he said. “I don’t think we’re near the end of it.”
McKnight’s home buying journey has taught him a few things. He advises would-be buyers to enlist the help of an experienced real estate agent. Find what you want, but you can’t be as picky as you once could. Be patient and wait for what you want to come on the market. Once it does, you have to make a move.
“I just think that the economics are in favor of the seller right now,” he said. “It’s just really it’s tight here. It’s tight everywhere. ...It’s just one of those times. It’s difficult with little inventory on the market.”
This story was originally published May 3, 2021 at 6:00 AM.