Cheap money, cash offers dominated 2021 house market

COLUMBUS, Ohio (WCMH) — Cash deals, a lack of housing stock, and cheap borrowing rates gave Columbus buyers a tough 2021. About one in five homes were cash transactions, and realtors sold 93% of homes on the market last year.

And there’s no end to the aggressive offers in sight, although by the end of the year interest rates may have gone up to 4%, say two of central Ohio’s real estate experts.

Sue Van Woerkham, the 2022 President of Columbus Realtors and agent with Corcoran Global Living, and Patti Brown-Wright, Real Estate Technology Partners, sat down with NBC4’s Cynthia Rosi to talk it through.

Money is cheap to borrow, for now

Van Woerkham points out that interest rates have gone up a little bit, but the rise is still low, with 4% predicted by the end of 2022. “We haven’t seen much of a rise yet, which is a good indicator to buyers who are thinking about jumping into the market — this is a good time.

“Money is still really cheap, which keeps the payment low. So it’s a good time to buy before those interest rates start to go.”

She points out that in 2010, realtors sold about 53% of the homes on the market. In 2021, they sold 93% of homes on the market — and there were tens of thousands more homes to sell in 2021 than in 2010.

Brown-Wright pulled the figures, showing that 33,548 homes and condominiums were sold in Central Ohio in the first 11 months of 2021. That’s up by 9.3% higher than the same period last year, and surpasses the total number of homes sold in 2020.

“Inventory is what’s down and that has an effect on everything,” Brown-Wright said. “Right now it feels like we are out of synch to an extent because there isn’t a lot of inventory.”

Is there a housing bubble?

Both experts believe that a correction will eventually occur — what goes up, must go down is a realtor’s maxim. But foreclosures are currently low due to deferred payments, they point out.

No bubble at the moment, they both agree.

Appraisal values can be lower than price paid

“We are looking at appraisals and they’re starting to come in a little less than what the purchase price is,” said Brown-Wright. “Why that is we don’t know at this time, but we’re looking very closely at if this is going to affect any of our buyers on the appraisals, or our sellers.

“The appraisers are very good at what they do. They know it, they look at it, look at the solds, the actives, what’s gone on in the area, but buyers have driven it up because of the lack of inventory.”

Influx of cash “astronomical”

Cash sales, and the influx of cash, were the surprise of 2021. Van Woerkam says people dip into 401k plans, get loans from their parents, or realize equity from a house sale.

Brown-Wright observed: “A lot of people are paying cash on their homes, and an influx of cash has been astronomical in this last year when I look at our figures. So, I don’t think we’ll see that bubble, but of course what goes up must come down, so we’ll see an adjustment, I really think so.”

They’ve seen scores off offers on a single house — up to 80 offers — but pretty much they all begin to look the same, said Van Woerkham, in about the same range, with the same terms offered.

Bidding over the appraiser’s value

And cash is changing the way people have traditionally done business. Brown-Wright said: “going back to the cash, roughly 1 in 5 homes — 19% — were cash transactions in November.”

If you’ve bid up over the asking price in order to win, and you’re paying cash, that’s a big worry off the seller’s shoulders. There’s not going to be an appraisal that might cut your price.

That’s because it’s the banks that require the appraisal, not the seller.

2022 still a seller’s market

If there’s a take-away from this conversation, it’s that 2022 continues to look like a tight property market.

Although interest rates could rise by the end of the year, discouraging some buyers, it still looks like a better year to sell than to buy.

This could frustrate people without cash options and deep pockets, who will be waiting for the bubble to burst, and for the what’s-gone-up to finally come down.