Cincinnati Real Estate

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Kathy S. Koops GRI

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Are Home Values Rising Too Fast?

filed under: Real Estate posted on March 5th, 2018

Are greater Cincinnati home values rising too fast?

Keeping Current Matters calls it “overinflated”.

Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report:

“The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300). January’s price increase marks the 71st straight month of year-over-year gains.”

Seventy-one consecutive months of price increases may have some concerned that current home values may be overinflated.

However, at the same time, Zillow issued a press release which revealed:

“If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”

Here are two graphs that help show why home prices are exactly where they should be.

The first graph shows actual median home sales prices from 2000 through 2017.

Are Home Values Really Overinflated? | Simplifying The Market

By itself, this graph could heighten concerns as it shows home values rose in the early 2000s, came tumbling down and are now headed up again. It gives the feel of a rollercoaster ride that is about to take another turn downward.

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However, if we also include where prices would naturally be, had there not been a boom & bust, we see a different story.

Are Home Values Really Overinflated? | Simplifying The Market
The blue bars on this graph represent where prices would be if they had increased by the normal annual appreciation rate (3.6%). By adding 3.6% to the actual 2000 price and repeating that for each subsequent year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit LOWER than where they should be right now.

Bottom Line

Based on historic appreciation levels, we should be very comfortable that current home values are not overinflated.

Cincinnati’s Bottom Line

And while the national numbers don’t show “overinflated prices” or “values rising too quickly” local buyers need to be aware that today’s bidding wars (in certain neighborhoods) may make resale in the near future very difficult.  Slightly rising interest rates and the lack of homes for sale has made this a very interesting time to buy and sell a home (or condo) in the Cincinnati area.

The latest official stats from the Multiple Listing of Greater Cincinnati reflects a “cooling” housing market  

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