When our boys were small, my wife and I enjoyed taking them to the Memphis Kidde Park to ride the rides. Now that they are 10 and 16, and things have changed. They are all about Cedar Point and their world-class roller coasters. Different roller coasters can provide riders with radically different experiences.
At Cedar Point, the big coasters are very exciting, and for some, terrifying. As you began your assent, with each click of the wheel, you began to feel an increase in adrenalin as you anticipate about how high up you are traveling, and an equal or greater fear of how far down you will fall, and how fast that will happen. It’s not for the faint of heart. On the Top Thrill Dragster, it’s literally a 30 second ride in which you accelerate from 0 to 120 mph in 4 seconds. (See video below) And then there’s the other extreme, like the Little Dipper roller coaster at the Memphis Kiddie Park. The up’s and down’s are relatively pleasant and much less stressful.
Markets are like roller coasters. They all go through cycles and every market is different. So don’t listen to what the news says about national trends because they may not represent your market. Sales prices increase to a certain level and then, historically, they decline. History shows that the cycles usually happen every 10 years or so. But that is not set in stone! Who knows what the future holds when it comes to our market? So is Northeast Ohio in a bubble? How high have prices climbed since 2008 and how far will they fall in the next correction or recession?
Here is a chart that reflects all single family home sales in Cuyahoga and Summit County over the past 10 years. We are clearly on an upward trend. You will notice that the increase to the top is not a steep climb in the Greater Cleveland market. Who knows where the top is? Only time will tell.
Since Cleveland has a lot of days with cloud cover due to Lake Erie, I thought that these value maps generated by AVM’s that were taken from the NAR’s (National Association of Realtors) RPR (Realtors Property Report) were interesting. They do reflect where some of the hot spots are right now in terms of the market. Notice that the higher values are along the lake shore, which makes sense. And of course, the city of Lakewood is one of the hottest markets in our area right now.
Rocky River and Lakewood Areas
In many of my appraisals I have completed within the past year, I have noticed that despite the persistent shortage of inventory, sales prices have been flat or increasing by a relatively slow rate at 3-4%, in many of the areas in Northeast Ohio. It’s really only been in the past few months that I have seen more of an evidence of greater rates of appreciation, above and beyond the typical seasonal changes. It should be noted that some neighborhoods are experiencing a much larger appreciation than 3-4%.
It should be noted that in every appraisal, two analysis are made by the appraiser. An analysis of the market trends of the entire neighborhood, including all residential, condominium or multi-family sales (1-4 units), depending on what kind of property is being appraised. Then a second analysis is made of what comparable sales are doing. Many times there is a difference between county and neighborhood trends in comparison to what comparable sales trends are doing. Sometimes overall sales are trending up or down at one rate, but a careful analysis of the data may reflect that comparable sales yield different results.
I recently completed a condominium appraisal in the city of Brecksville. My research revealed that overall neighborhood condominium prices were increasing by about 2% over the past year. However, when I made a close examination of what comparable sales were doing, my research revealed that they were increasing by about 3.3% over the past year. So I would never recommend that an individual apply national, county or even city wide appreciation figures to their home. An analysis of what homes that are comparable are doing is really key.
In my prior blog posts, I have really not provided much information on what’s going on in my market. At this year’s OCAP (Ohio Coalition of Appraisers) meeting, Jonathan Miller, a nationally recognized and well-respected appraiser and speaker, author of Housing Notes and founder of the Elliman Report, (and super nice guy I might add), spoke about the value of providing some information on a regular basis, to reflect what’s going on in our local markets and to provide some historical context. So, here is my first crack at a market update for the some of the areas in the Greater Cleveland area. Let me know what you think. I will be providing this information monthly in my blog.
The data below is reflective of the market activity for single family sales in each county for the month of June of this year and June of last year. This will give you a little context as to where we are at today. I have also included charts reflecting a two-year sales trend for each county. Hopefully, you will find this information valuable!
The charts below were updated on 07/06/2018
Here are some charts reflecting residential single family sales over a two year period of time in each county.
It’s always interesting to look back in time and compare it to what’s happening now. Clearly, we are in a different market than back in 2007-2008. In my opinion the market today is much more stable than in 2008. Hopefully this will continue to be the case.
I clearly remember 2007. At that time I had completed an appraisal for a reverse mortgage. I reported that sales prices were declining in that neighborhood. The owner of the mortgage company that hired me chewed me out and said that I didn’t know what I was talking about and that there is ‘no way’ home prices were in decline. He also told me that he would never use me again. He wasn’t lying about that. His company went out of business 6 months later. I know because I was still trying to collect the money that company owed me for my appraisal when they went out of business. That was not reflective of all of my clients though. Around that same time, one of my clients, who is a smaller local lender in my area, commended me on being honest in reporting what is going on in the market instead of just reflecting what others wanted to see. It’s interesting that they are still one of my best clients today! Funny how that works.
It is interesting to me that across the board, there has been a decrease in the number of closed sales in June in comparison to last year. This may be due to a continued shortage of inventory on the market. Part of the reason for the persistent shortage is that we have a bit of a stalemate in this market. People who would like to sell their homes are afraid that they will sell them quickly, which is very likely, but not be able to find another home that they would like to buy due to the current shortage. Until market forces change this situation, this shortage is likely to persist. Sometimes charts tell the story better. Notice these two charts. One reflects the total number of listings in comparison to sales in Cuyahoga County and the other in Summit County. It is clearly to see the reduction in inventory at a steady pace over the past several years.
Analyzing the data in my area, we are experiencing slow but steady increases in market values into the foreseeable future. Part of the reason is the continued shortage of inventory on the market. Values in Northeast Ohio are climbing more like the Little Dipper. If there is a correction at some point in the future, we will likely have less of a decline as a result. That is a bit anti-climactic. If you want some real excitement, visit Cedar Point and take a ride on the Top Thrill Dragster.
It is impossible to really know what the future holds in terms of sales prices. It is fascinating to see what happened in the past. But the past is not always reflective of the future. Every market cycle is like getting on a different roller coaster for the first time. We don’t know where the twists and turns will be. That being the case, there is no sense in worrying about when the next correction or recession will be or whether or not we are currently in a bubble. The important thing is to make the best financial decisions you can every day. For most people, their number one financial asset is their home. If you’re purchasing a home, make sure to have it appraised, even if the bank says that you don’t need to. It’s the wise thing to do.
As a new feature of this blog, on the first part of every month, I will provide a similar market update that will help readers to see what’s going on in the market today with some historical data for context.
Thank you for reading my blog! If you would like a .pdf copy of some of the data I have compiled above, click on the link at the beginning of this article. Feel free to share my report with anyone that you think might find this information useful. Thanks for sharing!
So, what do you think? Will the next change in the market cycle by more like the Top Thrill Dragster or the Little Dipper? Let’s hope it’s more like the Little Dipper! I would love to hear from you as to where you are located and what whether you think your market is more reflective of the Top Thrill Dragster or the Little Dipper.
Top Thrill Dragster at Cedar Point
The Little Dipper at Memphis Kiddie Park in Cleveland
Here are some other awesome articles and podcasts I recently enjoyed. I hope you will also!
Housing Professionals Shouldn’t Believe Their Own Press Releases – Housing Notes by Jonathan Miller
What Is An Appraisal Contingency and Why Is It More Important Now Than Ever? – Birmingham Appraisal Blog
Valuer’s Dozen: Rachel Massey – Valuation Nation
Valuer’s Dozen: The Skapinetz – Valuation Nation
Changing Markets – Ann Arbor Appraisal
The Appraisal Report – Alternatives to the Traditional – Appraiser eLearning
What a 2020 Recession Would Mean for Your Home Buying Dreams – Apartment Therapy
Why Science? – George Dell’s The Analogue Blog