Columbus market cooling?

Question

Hey Columbus investors,

Checking Zillow lately and comparing results against a less-heavily-invested-in city (Cleveland), I seem to be seeing a pattern of an overbought and cooling-off real estate market here.  Even the B and C areas like Franklinton and North Linden are nearly all bought up and flipped/listed for rent, and Zillow has scores of properties listed for rent that have sat for 30-90 days (if not more).  Several of the obviously-flipped and listed properties for sale have also had recent price reductions.  You can always find some doom and gloomer claiming that this is the end, but are we perhaps finally past the peak of the Columbus real estate buy-up of recent years?  Or is this a pause in the storm about to resume?  Or have I drawn faulty conclusions from my perusal of Zillow?  Happy to hear all thoughts.

Thanks,

John M.

Allen Tracy · Answer

I've definitely seen a lot more "Price Reduced" e-mails from Zillow.  All I see is turnkey units or absolute dumps that an investor is bailing on.  Hardly any "value add" properties left and the ones that are left are selling for near turnkey prices.  Myself and fellow investors have seen a cooling trend in trying to rent out units for higher prices, we've been having to reduce the amounts ourselves (seeing the same thing in other markets), but we haven't seen a ton of cooling yet, more of a holding steady.  I've also seen huge rent increases in Section8 though so even at a crazy high sales price it still meets the 1% rule.

Maybe we're at the top, it's flat lining a bit, and we'll start to see a slight drop soon.  I'm not sure that we're going to see a huge drop though.  There's still tons of new investors flooding the market that are now looking at appreciation instead of cashflow so they're willing to pay more and have less cashflow.

I'm hoping you're right though and we'll see a drop at some point.

Brandon Goldsmith · Answer

It can be hard to tell sometimes, because real estate usually slows down towards the winter anyways. I think Columbus is still a desirable city to buy in, but not sure how much more prices can be driven up @John Mullen

John Mullen · Answer

Thanks for the thoughts everybody!  I was intrigued by what @Clay Boykin was saying about impending attention swinging from the Sunbelt to the Midwest.  I hadn't heard that take before.  The other thoughts are well-formulated and run the spectrum of what I'm familiar with, from "Zillow contributed to a bubble and now they're trying to avoid paying the piper" to "this is just normal winter cool-off."  My semi-educated guess is that it's somewhere in between those two positions.  If pressed, I would say that while Columbus is still hot relative to some nearby cities like Cleveland, this winter is proceeding a lot differently from the frenzy last winter.  But as @Jason DeVelvis said, slowdown is relative!  Thanks again all, and happy hunting.

John M.

Clay Boykin · Answer

@John Mullen I like your insight comparing B/C neighborhoods in Columbus to Cleveland, although I wouldn't trust Zillow as a prime resource. I recently talked with a investor who made a valuable point about the hot markets (sunbelt states) with the Midwest. He stated that as of right now, residential investors are focused on the Midwest due to how cheap it is, older homes, lower rehab cost, and shorter DOM (for obvious reasons). We then discussed how the sunbelt states are going to cap out around 18 months from now and everyone will start moving towards the midwestern states rather than the current hotspots (Texas, Nevada, Florida, Georgia, etc). That's when the market will flip. Midwest will boom like Texas (more than it already is) and then the sunbelt states will be in a drought. As far as rentals/flips Columbus, Indianapolis, and St. Louis all have a plethora of inventory just sitting around that you wont find on market. You just have to look in the right locations. Happy Investing!

Remington Lyman · Answer

I wish it was! It is just the winter months. We did not see it last year because of COVID but this is pretty normal in a healthy market like Columbus, Ohio

Account Closed · Answer

Zillow is selling off 18,000 of it's properties as they go out of the iBuyer business.

I suspect, though it's difficult to prove, that Zillow had a vested interest to Zestimate "high" on properties to prop up their venture. With their disasterous withdrawal from buying properties and their write down of $548,000,000 they have a vested interest now in reducing Zestimates to more accurately reflect true pricing to try to convince their very upset investors and the SEC, that it's the market "cooling" not their previous attempt to manipulate the market.

When everyone relies on your guess (Zestimate) you can influence the market by bumping prices up ever so slightly every month. When that collapses, you're stuck with a sheepish grin and a lot of unhappy people.

I think we will see Zestimates "correct" for the next 6 to 12 months while they sort things out and try to keep the SEC (and investors) out of their offices in Seattle.

Jason DeVelvis · Answer

On one hand, I've noticed that even in REALLY crazy areas, fixers are sitting on the market for an extra day or so. Whether that's just sellers listening to their agents and waiting on all the offers to come in, winter slowdown, or an indication that the market is cooling, I don't know. But I'm here for it. Man it's stressful to watch great opportunities go by without being able to see/offer on them because I'm out of town for a few days.

That said, I just offered $37k over list on a property and got beat by someone who offered "well into $40k over." So I use the terms "slowdown" and "cooling" lightly :)

Columbus market cooling?

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