The red-hot Central Ohio housing market is seemingly lifting all boats, from long-desired areas like Bexley to underdog communities like Obetz. But concerns lie underneath the surface.

You don't have to be an industry insider to know that Central Ohio real estate is on fire. Even if your only news source is Facebook—and shame on you—then you've surely seen reference to the skyrocketing home prices in Columbus. So what's going on?

In simple economic terms, demand is far outpacing supply. New homes aren't being built fast enough and affordable new homes are scarcely being built at all, forcing buyers to turn to the existing home market, where houses are being snatched up almost as soon as the For Sale sign goes in the yard—especially those in the most desirable inner-ring neighborhoods like Upper Arlington, Bexley, Clintonville and Grandview, where home values have risen nearly 50 percent since the economic recovery began in 2012.

But it's not just those pricey neighborhoods, where median home values are now exceeding $300,000, that are hot. The demand for affordable housing is pushing values in Olde Towne East and Franklin Park (see “The East Side Rises Again,” Page 44), and more established middle-class neighborhoods like Forest Park and historical underdogs like Whitehall and Obetz.

In a sense, the region's own economic success is victimizing the Central Ohio housing market for buyers. Jobs are up. Growth is up. People want to live here. But we're not building houses fast enough to accommodate them. In a recent story from In Contract magazine, the bimonthly serving the Columbus Realtors association, Ted Jones, the chief economist with the Stewart Title Guaranty Co., evaluated Central Ohio's housing shortage.

In Columbus, he wrote, there are more jobs now than ever before. Job rates have increased every month since 2010. In 2016 alone, 18,600 new jobs were added in the Columbus Metropolitan Statistical Area (MSA). However, only 8,249 residential units, from one-bedroom apartments to a $2 million home, were built last year.

Jones explained that a market is considered to be in balance when there are 1.25 to 1.5 net new jobs created per new residential unit. In the Columbus MSA, that rate was 2.25 new jobs to new homes in 2016, reflecting what Jones called a “drastically underserved market.”

“Every study says we're underbuilding,” says Jim Hilz, executive director of Building Industry Association of Central Ohio. According to Binns Real Estate Service, which tracks Central Ohio's building industry, 2,607 new homes were sold in the region in 2016—the most since 2007. Still, that accounted for only about 8 percent of all homes sold. By comparison, more than 25 percent of all homes sold in the early 2000s were new builds.

What's more, Hilz says, “We're not building what the consumers want.” He says the average sale price of an existing home in Central Ohio in 2016 was $202,000, while the average cost of a new home was $333,000, “and on the north part of town, that average new home price goes well over $420,000.”

“There's a huge gap between existing and new,” Hilz says. “We're not building $150,000 homes anymore like we used to, and we're missing a whole segment of the buying population.” Why not? There are a number of factors. “It starts with zoning,” Hilz says.

Density—the building of many smaller homes on smaller lots in a subdivision—is still a bad word in too many areas, with too many zoning boards, says Hilz “despite every user survey that says buyers want walkable neighborhoods. We're not building what consumers want.”

A handful of new developments are starting to serve the demand for what's dubbed the “New Urbanism,” such as the Bridge Street development in Dublin and Evans Farms in southern Delaware County, which touts “front-porch living” highlighted on Page 56. But with prices starting north of $300,000, they aren't affordable for many, including the millennials who are entering the market in droves, according to research, only to fight over those few properties in their price range.

Compounding the issue is the fact that fewer existing homes are being listed for sale. A recent Columbus Realtors housing report said there were 4,286 homes on the market as of February 2017, a whopping 21 percent decrease from a year earlier. “If you thought inventory couldn't possibly get any lower, it definitely did,” wrote Columbus Board of Realtors president Mic Gordon in the release.

The result is that demand for housing, and thus, home values, are through the roof. “Demand is so high that it's not unusual to get multiple offers within the first 24 hours, and in most cases, listings are going above asking price,” says Jeff Ruff of Vutech & Ruff realty.

Ruff says that because demand is so high, he's writing more and more escalation offers—open-ended bids that offer $1,000 or $1,500 over the highest competing offer. “But even those need some kind of cap. You just don't know where the ceiling is.” Ruff adds, “There's a lot of frustration out there. Buyers are making multiple offers and still being beaten out.”

The market scarcity is starting to feed on itself. “A lot of people would sell if they could find something to move into,” says Ruff. “But they can't find what they want, so they're staying.”

Instead, many are choosing to renovate their homes, sparking a remodeling boom that rivals homes sales (see “The Renovation Boom,” Page 52). “The renovation industry is doing very well,” says Hilz. “But that, too, has a stifling effect on the number of homes available on the market.”

“Simply put, we're not building enough houses for the people we have here now, much less the ability to serve the population growth that everyone predicts we'll see,” Hilz says. “We're talking needing half-a-million housing units over the next 30 years to meet the demands of the region's job growth. You don't want those jobs to go elsewhere because you can't house the people who want the jobs.”