Things Change! Review and Outlook -- Columbus Housing Market

Jobs are everything to an economy, the housing market and the overall demand for real estate. Great news for Columbus, 2016 saw 18,600 net new jobs added for a 1.77 percent year-over-year growth rate. At the end of December 2016, Columbus had 1,068,800 total jobs on a seasonally adjusted annualized rate - the most ever in history.
 
Total employment on a seasonally adjusted annualized rate for the Columbus, Ohio Metropolitan Statistical Area (MSA) is shown in Exhibit 1. Not only has the metro gained back all of the jobs lost in the 2008 to 2009 recession, but it added an average 23,100 net new jobs per month in the prior four years.

Job growth has spilled over into housing sales in 2016. For the entire year of 2016, Columbus saw 30,595 total sales, up 4.8 percent from 2015, which was 8.7 percent greater than 2014. The monthly average price in 2016 was $200,252, a 5.85 percent gain when compared to 2015. Exhibit 2 shows the raw – non-seasonally adjusted – monthly sales.  Historically, November has the fewest sales.

To remove the seasonality effect, the average number of sales per month for the prior 12 months is calculated and shown in Exhibit 3. The average number of sales per month at the end of 2016 was an all-time record, even greater than during the housing bubble peak in 2006 when subprime loans were given to people without the capacity to repay them.

Not only did housing sales peak in 2016 (on a 12-month moving average), so did average price. Exhibit 4 shows the average price per month for the prior 12 months. Just like the number of sales, average price ended 2016 at an all-time peak.

So where to from here with regard both rents and home prices?  
Just as any market operates, the answer is a function between the interaction for supply and demand. Exhibit 5  shows the number of single and multifamily building permits issued annually. 

In 2016, 8,249 total dwelling unit permits were issued. These range from apartments to mansions. 

Markets are considered in balance and when there are 1.25 to 1.50 net new jobs created per new dwelling unit. Fewer than 1.25 jobs per new dwelling unit implies overbuilding while more than 1.50 new jobs per dwelling unit indicates underbuilding. With 2.25 net new jobs per new dwelling unit in 2016, Columbus remains an under supplied market when it comes to housing. 

The bottom line is that strong job growth, coupled with demand for new housing exceeding the supply of new construction, bodes for an outlook in 2017 of rising home values and residential rents.

Jobs are everything. Period. And Columbus Ohio is performing well.