On the Thursday prior to the Memorial Day holiday weekend, I listed a ridiculously cute 3 bedroom, 2 bathroom home in Crescent Hill for $295,000. Over the next three days there were 42 showings of the property. And by Monday when I sat down with my seller clients they had 12 offers to review, all of them for more than the asking price and several significantly so.
Scenes like this are playing out all over Louisville nearly every day as a large number of buyers, armed with historically low mortgage rates, are battling over an anemic number of available houses for sale. I’ve heard chatter from many agents in our office and those in other brokerages that they feel like “everything is overpriced”. I’ve also heard a lot of speculation that at some point there will be a significant market correction leaving us with lots of overpriced homes to sell a few years down the road. Of course, no one knows for certain what the future holds and whether today’s prices reflect a truly overvalued market or are simply establishing a new baseline for real estate prices in Louisville.
Two lucky agents and their clients won the bidding war for my Crescent Hill listing. Which means I had the unenviable task of calling the other 11 agents to thank them for their hard work and let them know their clients did not get the house.
While commiserating on the phone with one of these deflated agents, I blurted out that this was the ‘craziest damn market I’d seen in the 27 years since I’d gotten my real estate license’. The reply from this savvy inquisitive agent, Jenny Ditty Kang, was something along the lines of: “But what if the home prices in Louisville are just catching up to other markets?” Which was a great point and something those of us who are in the weeds of showing properties and writing and responding to multiple offers every week rarely have the perspective or time to consider.
So, I’ve attempted to put Jenny’s supposition to the test by looking at median home sales price data for Louisville for April 2021, one year prior in April 2020 and 5 years prior in April 2016. I then calculated the one and five-year percentage changes. I did the same for the median home sales price nationwide and for sort of similar cities Nashville, Indianapolis and Cincinnati. The results are in the table below.
With a one-year sale price increase of 11.8% and a five-year increase of 44.2% it’s quite apparent that the Louisville real estate market has been on a very good, sustained run of appreciation. Louisville’s median home price is also on par with Cincinnati and higher than Indianapolis but considerably less than the national median sale price of $341,600 or Nashville’s stratospheric $385,000 (up 72.6% in the last five years!)
As long as the broader economy stays healthy and mortgage rates remain low, I expect the Louisville housing market to stay robust. That said, I also think the current rate of double-digit appreciation is unsustainable and that, within a year or two, the rates of appreciation will likely return to the 5-7% annually that has been typical of this market.