America’s heartland hit its stride this year. The Midwest comprises 15% of all US housing units and is often overlooked due to its slow and steady nature. In a time where affordability is among the top concerns in the housing market, the Midwest is well-positioned and housing fundamentals are changing: 7 of the 10 most affordable states in the country are in this region. Our Director of Economic Research, Ali Wolf, spent time in the Midwest earlier this month and recaps the trip below.
Columbus is among the least affordable Midwest markets with 43% of households that can afford the median-priced home. While the lowest among the Midwest, Columbus still ranks higher than the 41% national average.
The median new home price in Cincinnati of $288,000 is 12% below the national average, but household earnings are 10% higher than the country’s median household income of $59,000.
New home absorption expectations in the Midwest are lower than one sees in other markets; generally, 1.00-2.00 sales per month is considered good. Indianapolis had the highest average sales rate per community in July at 1.65, up from 1.47 during the same time last year (see chart below). Cincinnati (29%), Indianapolis (12%), and Minneapolis (9%) saw the greatest increase in contracts on a year-over-year basis.
A LOOK AT THE BUCKEYE STATE
While the stats point to overall affordability, home prices relative to history are challenging everyday Americans in the Midwest. In no place is this more obvious than Columbus, Ohio, a market where the median single-family new home closing price is nearly 40% higher than the 2007 peak. Anecdotally, we have heard of $200,000 homes selling for $20,000 over asking price (!). We toured the top best-selling communities in Columbus and observed some interesting trends:
Single-family detached still dominates. Perhaps not surprising is that all the top 10 best-selling communities are detached. More surprising, however, is that the median square foot of these communities is 2,100, 300 square feet lower than the national home size of 2,400.
North of the city. 70% of the top selling communities are north of downtown in areas like Westerville, Delaware, and Powell. M/I Homes, headquartered in Columbus, makes the list four times with their north-side projects.
Age targeted is attractive. Epcon Communties made the list twice with their age targeted product. Median prices in these lifestyle-oriented and low maintenance communities range from $360,000 to nearly $450,000.
Compromise looks different. In markets across the country, we are seeing buyers compromise on product to get into a new home. This can look like an attached home, a parking pad or detached garage, a high-density neighborhood, or even giving up formal dining room space. In Columbus, while the traditional dining room may still be in place in most cases, we saw other compromises surface from the best-selling list, including being next to a cemetery, corn field, or moving to an underdeveloped city* to achieve an attainable price.
Focus on value, but with a caveat. Darby Fields by M/I Homes in Plain City is the best-selling community in the metro (picture from our visit below). Plain City’s tax rate is 1.8%, far below the 2.5% of the nearby and more desirable Dublin. The community has an average monthly sales rate of 8.26 even as the builder raises prices each month. The majority of the buyers are first-time owners, and while the relatively low price of roughly $280,000 is a major selling point, buyers are still putting 10% in options and upgrades.
Our consultants do work all across the country and understand regional differences in product, density, pricing, and absorption.