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Expert: Central Ohio Housing Market Recovery ‘Slow, Steady’
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The Central Ohio real estate market has seen its ups and downs over the past 10 years. Prices peaked seven years ago, then plummeted when the housing bubble burst. Now sales and prices are on the rise – raising fears of another bubble. WOSU talked with a couple of real estate experts to find out where the Columbus market stands.
RealtyTrac’s vice president Daren Blomquist describes the recent trend in Columbus’ housing market recovery as “slow and steady…as opposed to the torrid pace of recovery we’re seeing in some markets that does give us more cause for concern.”
Central Ohio home sales have risen significantly over last year; they’re up by about 20 percent. New construction is on the rise, as well. But median sale prices have risen only slightly, up only 4 percent. But Blomquist said that’s positive, manageable growth.
“We start to get some concern…when those home prices start increasing by 20, 30 percent year over year.” -Daren Blomquist, RealtyTrac
“But what we’ve seen is 18 consecutive months with the average annual increase in home prices at four percent which is a much more sustainable increase,” Blomquist noted.
The big housing bubble that led to the Great Recession was partially caused by significantly overvalued homes. Before the bubble burst, Central Ohio home prices were overvalued.
Nearly eight years later, Columbus homes are undervalued by about 10 percent compared to about four percent nationally, according to Trulia’s Bubble Watch which monitors real estate trends.
So, we’re not in bubble territory.
Another sign of stability is the modest rate of new construction. In Franklin County, and the surrounding area, it’s up about 15 percent. Trulia’s chief economist Jed Kolko said that’s still well below normal levels considering there was very little new building following the recession.
“Now, even though construction has rebounded, in the Columbus area construction is running at about 20 percent below normal levels,” Kolko said. “Nationally, construction starts are running at about 40 percent below normal levels.”
“Construction still has a way to climb back before we get even to historical normal levels, much less overbuilding.” -Jed Kolko, Trulia
There is one area of concern: foreclosed properties still left over from the recession. Bank repossessions in the Columbus metro area have nearly doubled this year. Those properties soon will be for sale.
Blomquist worries about a potential bubble caused by outside investors who may overpay for the foreclosed properties.
“It could be creating a sort of a bubble. It’s not the same sort of bubble that we saw in the last housing boom and bust where that bubble was facilitated by loose lending…This is a totally different phenomenon in many ways,” Blomquist said. “But it could be pushing prices up to higher than they really should be.”
Bank repossessed homes generally are back on the market for sale in two to six months.