Cincinnati, Ohio
The Queen City Remains One of the Fastest-Selling Markets in the Country
By Carole VanSickle Ellis
When a multitude of large, urban markets began cooling off with the advent of 2023, Cincinnati, Ohio, just kept getting hotter. The midwestern city, also often referred to as “The Queen City” thanks to poet Henry Wadsworth Longfellow’s 1854 poetic reference to it as “The Queen of the West,” was ranked as one of the Realtor.com’s “most improved large markets” at the outset of this year thanks to the eternally magic combination of affordability and relative availability of housing.
Of course, with most large, urban markets — including Cincinnati — battling to create new inventory, the city could not have ranked so well if it were not for the extended metro area, which boasts three of Ohio’s most affordable places to live according to a recently published report from SmartAsset and reaches into multiple neighboring states.
“We measured the total cost of owning a home (using the average home cost) …throughout a five-year period, [and] that five-year cost was then measured as a proportion of median household income…to determine affordability,” explained the SmartAsset team.
The group also factored in closing costs, real estate taxes, homeowner’s insurance, and mortgage rates. They determined that three of Greater Cincinnati’s neighborhoods — Delhi Hills, Northbrook, and North College Hill — all fit the bill for relative affordability in the area at this time.
“That does not necessarily mean there is a ton of home stock out there,” warned City Beat contributor Katherine Barrier. She noted that rising mortgage rates and ongoing inventory issues prevent nearly all markets from offering access to a high volume of truly affordable homes.
For investors active in the Cincinnati area, the strength of the local economy likely outweighs concerns about affordability. Not only does Cincinnati boast the fastest-growing economy in the Midwest, but the Cincinnati Regional Chamber of Commerce projects that the region will produce more than 1 million jobs over the next decade with “considerable growth in high-paying jobs that demand a bachelor’s degree or higher.”
This trend will likely mean that buyers and renters coming into the market looking for housing will be working with acquisition budgets that exceed local affordability benchmarks. The chamber highlighted “skilled trades” and “information technology” as two sectors presenting “immediate pathways to higher-paying jobs,” and predicted nursing, software development, food preparation/service, and home health aides would see the most growth over the next decade.
According to local professionals, there is still plenty of competition for Cincinnati properties, and it is only getting more intense.
“Buyers who put off house hunting in the second half of 2022 are already gearing up to find the perfect home in 2023,” observed local broker/owner Brett Keppler in his report on the local area at the end of 2022. “Even with record-low inventory, life still moves on.” He noted that the volume of homes sold in the Cincinnati area in 2022 dropped by 12% year-over-year, but added, “Average sales price in Greater Cincinnati still increased by over 7%.” This contributed to record-low days on market in the city, a trend which continued through Q1 2023.
A Growing Population for a Complicated Job Market
Thanks to ongoing difficulties accessing inventory for sale, many members of Greater Cincinnati’s current 2.5 million-plus population find themselves compelled to settle for renting even if they ultimately plan to own their own homes. With the expectation that the local jobs market will add nearly 68,000 jobs in the next five years alone, rental property investors will find plenty of residents easily able to afford market rents in desirable locations. The key to attracting these residents lies in offering them the types of properties they find attractive. This means, in many cases, offering single-family residential options that look and feel like home in markets where most of the alternatives are located in multifamily developments.
RENTCafe analyst Nadia Balint observed that in Cincinnati, like many other midwestern markets, builders are doing “a pretty good job” of keeping up with the demand for family-size units in multifamily buildings. However, the demand for single-family residences remains strong both in the retail buying and rental market. In Cincinnati, less than two-thirds of all apartment units are “family-sized,” creating opportunities for investors with an eye toward single-family rentals (SFRs) or multifamily development.
The city has prioritized creating an environment designed to attract high-paying employers in the IT sector to the area, working in partnership with the regional chamber of commerce and local IT advocacy groups to sponsor programs to help current residents “reskill” in IT specialties in the wake of the COVID 19 pandemic and to lure new IT employees to the area. These programs feed growing local demand for new hires in the sector. Employers can sponsor internships and training programs, while educational institutions and government agencies can access “pipelines” of IT specialists as well.
Both Ohio and Kentucky participate in these drivers, and the area is one of the most cost-friendly regions in the country when it comes to starting or supporting any type of business.
In Greater Cincinnati today, these efforts extend beyond IT and into the sectors of biohealth, business and professional services, advanced manufacturing, and general technology. The region is “one of the best ecosystems for manufacturers to thrive and grow,” boasted JobsOhio, citing proximity to the Ports of Cincinnati and Northern Kentucky, previously known as the Port of Cincinnati, and the Ohio River waterway as a primary draw for all types of manufacturers from aerospace to automotive to “foods and flavoring.”
At present, the Cincinnati Tri-State area boasts ongoing projects like Nestlé-Purina’s $550-million investment in its first new production facility built from the ground up since the 1970s (the largest project in the Midwest in 2020), and hygiene, infection protection, and cleaning solutions manufacturer Diversey’s $86-million production and logistics facility, which brought 300 new jobs to the area in 2021 alone.
Although the rising population and growing influx of businesses is making it difficult to access city-based housing for many new Cincinnati residents, the tri-state area has prioritized making locations farther afield accessible to would-be homeowners and tenants.
In addition to the traditional methods of travel expedited by interstates 71, 75, and 74, the Southwest Ohio Regional Transit Authority (SORTA), the Transit Authority of Northern Kentucky (TANK), and the Clermont Transportation Connection (CTC) carry passengers throughout the Greater Cincinnati area to and from work. Historically, these transit lines, which offer primarily bus options, have been criticized for being “radial” in nature, requiring a passenger to travel into the downtown area before transferring to another line to reach their destination. However, Ohio officials have been working closely with Amtrak to incorporate a passenger railway into local transit offerings. All three systems are working to expand direct-route offerings despite pandemic-related challenges associated with worker shortages.
This past February, Ohio governor Mike DeWine directed the state’s Rail Development Commission to allocate funding to expand rail service in the Cincinnati Tri-State area.
“Expanded rail service will create small opportunities and huge opportunities,” said Cincinnati mayor Aftab Pureval in response to the Amtrak meetings and news of potential funding for the project. Amtrak itself predicted it could bring in $130 million annually via the “reconnected” Ohio lines. Investors may be able to spot prime locations for rentals or fix-and-flip deals by examining current and future transportation routes that would enable locals to cut time off their commute by taking more direct paths to their destinations. Following the progress of the proposed Cincinnati-Dayton-Columbus-Cleveland (3CD) routes could also expose potentially profitable investment opportunities. Investors should note that this type of project has been in the works before, most recently in 2010, but was killed due to political strategizing against state-funded passenger rail, so close monitoring will be essential.
A Positive Outlook Into the End of the Decade
One of the Greater Cincinnati area’s most noteworthy aspects is that it is trending in a positive direction across multiple variables ranging from cost-of-living to quality of life. U.S. News has ranked the city as the “Best Place to Live in Ohio” for four years in a row, and the area has climbed the ranks of “Best Places to Live” in the same publication as well as consistently ranking in the top “most affordable places to live” and “best places to retire” as well.
“Cincinnati is relatively affordable compared with other large, metro areas, especially those on the coast,” wrote U.S. News writer Jessica Esemplare in 2021, when the region was ranked 13th for affordability, 44th for best places to live, and 82nd for best places to retire. For comparison, in 2022, Cincinnati ranked 41st for best places to live, 22nd for affordability, and 34th for best places to retire. Esemplare added, “Families are drawn to Cincinnati for its excellent public and private education,” noting that 66 area schools are listed in the U.S. News top high school ranking and boast higher college-readiness scores than other similarly sized cities.
Danielle Hale, chief economist for Realtor.com, predicted Cincinnati and other midwestern markets are likely to “shine…with affordability taking center stage in 2023.” She added in January she expected a “flattening curve as over-priced markets slow and mid-tier markets flourish” and said she expected “above-average price growth [and steadily rising rental rates] in many Midwest markets” including Cincinnati.
For investors who prefer properties located close to major urban areas, acquiring properties in the Greater Cincinnati area could be a good move for 2023 as long as those acquisitions are preceded with cautious investigation and evaluation.
Side Bar 1
By the Numbers
152.6 Billion — Current GDP, in dollars, of Cincinnati
44 — Percentage by which Cincinnati’s GDP has grown in the last decade
3.1 — Most recent unemployment number for Greater Cincinnati
9 — Percentage under the national average for cost of living in Cincinnati
35 — Percentage of residents in Cincinnati with a bachelor’s degree or higher
1 — Number of days it would take to drive from Cincinnati to half the population in the United States
3 — Number of major league sports teams in Cincinnati (MLB Reds, NFL Bengals, Major League Soccer FC Cincinnati)
6 — Number of Fortune 500 Companies headquartered in Cincinnati
» Proctor& Gamble
» The Kroger Company
» Fifth Third Bank
» American Financial Group
» Western & Southern Financial Group
17 — Home value increases during 2022
25 — Percentage of homebuyers in Cincinnati from out of state in 2022
Side Bar 2
Cincinnati’s Uneasy Relationship with Landlords & Investors
Although more than 90% of all real estate investors fall into the category of “individual” investors, the general public and the headline-driven media often fail to distinguish between individual and institutional investors. This can create serious problems for individual investors in cities where municipal government officials have based successful careers off “protecting” citizens from politically vilified investors and landlords. In Cincinnati, this type of toxic environment could be brewing.
In January, the city made local headlines for filing three lawsuits in less than a week against Texas-based VineBrook Homes, which stands accused of creating a “public nuisance” by failing to fix properties in violation of city codes and, allegedly, violating the Ohio Landlord-Tenant Act. Lawsuits against property owners who are truly failing their residents are entirely appropriate, but the massive, positive publicity surrounding these lawsuits – especially if they are settled by institutional landlords out of court and for large financial payments that allow the “landlord” to claim no wrongdoing – can encourage more vilification of investors by local policymakers and legislators.
In the same coverage, Cincinnati’s Enquirer noted that the city has also filed lawsuits against local multifamily operators and quoted city mayor Aftab Pureval’s official press release, in which he emphasized the city’s “willingness to prosecute bad-acting landlords.” Shortly thereafter, the city filed additional lawsuits against a local property owner.
Investors should carefully consider who has been targeted and whether they were proven guilty of mismanagement or misconduct before making the decision to invest in a market.
Side Bar
Making Sense of the Tri-State Area
The Cincinnati metropolitan area, also referred to as Greater Cincinnati or the Cincinnati Tri-State area, is the metropolitan area centered around Cincinnati but including counties in Ohio, Kentucky, and Indiana. As a result, the official name for the Greater Cincinnati region in the U.S. Census is the Cincinnati, OH-KY-IN metropolitan statistical area (MSA). It is the 29th most-populous MSA in the United States and the largest metro area located primarily in Ohio. Usually when investors or analysts discuss Cincinnati, they include the entire tri-state area because it is nearly impossible to separate the smaller metro area, which encroaches on both sides of the Ohio River (and, by extension, into Kentucky) by itself, from the larger regional designation.
Since 2009, the Cincinnati Tri-State area has also grown northward toward Dayton, Ohio. This has led some economists to go ahead and consider the Greater Dayton area part of Greater Cincinnati, but this is not yet the norm. When considering Cincinnati from an investment perspective, an investor will be well served to also consider the following metropolitan areas for context and opportunities:
» Dayton, Ohio
» Louisville, Kentucky
» Lexington, Kentucky
» Columbus, Ohio
» Florence, Kentucky
» Newport, Kentucky
» Maysville, Kentucky
» Fairfield, Ohio
» Springdale, Ohio
