Welcome to 2023! I hope that you all had a nice time off over the past month. We all needed some rest from the crazy housing market we’ve experienced in recent years. Like most markets across the country, the Cleveland area housing market has been red hot for the past few years. Even before the pandemic’s incredible surge in housing demand, the market in Northeast Ohio was skating along nicely. However, the markets have hit an abrupt slow down, or might I say, cool down, kind of like this ice skater experienced.
How have the rapidly increasing mortgage interest rates impacted the housing market in Northeast Ohio? Let’s talk about it.
The data below reflects all single-family pending sales trends by month in Cuyahoga County over the past 10 years. As the chart reflects, last December saw the lowest level of pending sales within the past ten years, for last month. That’s significant! Interestingly, the highest number of pending sales we saw in recent years was in December 2020. So, things really have slowed significantly.
I’ve noticed recently that when I call real estate agents to confirm information about properties I am using in my appraisal, almost every agent answers their phone and if they don’t, even if I don’t leave a message, they call me back. Agents in my area are always good about returning my calls. But the fact that most answer immediately is a sign that things are slow. And truthfully I also call people back, even if they don’t leave a message. 🙂
While we still have a significant shortage of housing inventory in Cuyahoga County, we had more active listings last month than we had in December 2020 and 2021. The chart below reflects the total active single-family listings in Cuyahoga County. However, we have significantly fewer active listings than we did before the pandemic began. Interestingly, the number of active listings has dropped every year since at least 2013. But it appears that we have hit the bottom when it comes to active listings. We can expect more listings in the future.
Sellers are starting to realize that we are no longer in the same market as we were in 2020-2022. That is evident in the number of price reductions. According to Altos Research, 42% of the single-family home listings in Cuyahoga County have received price reductions. Last year at around the same time, 37% of single-family homes had price reductions. Some of this is seasonal, but a good portion of the declines recently is due to buyers not being able to afford as much as they once were due to the rate hikes.
What about those crazy bidding wars that were pushing prices up? According to Redfin’s data on single-family sales in Cuyahoga County, last November, 33% of the sales sold over their asking price. That’s down from November 2021 when the percentage was 43%. So, things are cooling. However, some homes are still selling above the asking price. These trends are also seasonal. However, you can see the impact that higher rates are having. You can expect this percentage to continue falling. In November 2019 the percentage was around 20% and in November 2017 and 2018, it was around 17%.
In the summer months, with more competition, more homes sell at or above the asking price. It will be interesting to see what this summer brings. With affordability issues, it is not likely that we will see the same percentage of homes selling above the asking price in the peak months of 2023.
What are housing prices going to do in the spring? Listing prices are indicative of future sales. After all, most homes are not going to sell at their full asking price. As you can see from the single-family listings in Cuyahoga County from last month, list prices are around the same level that they were in December of 2021. So, while the market is softening, single-family home prices in Cuyahoga County have not experienced a significant drop other than what is seasonal. The next few months will really be telling about what’s happening in our market. Right now, things are holding softening but holding relatively steady.
How much of their list price can sellers expect to see in future months? In December, sellers of single-family homes in Cuyahoga County were receiving 98% of their original list price, which is down from 2020 and 2021 levels in December, which were 100%. Before the pandemic craze, the list-to-sales price ratio was 97%. We’re heading in that direction.
In June of 2022, the list-to-sales price ratio was 103%. However, as buyers struggle with affordability, this percentage is likely to decrease in the peak months this year. Before the pandemic, in the summer months, the typical list-to-sales price ratio was around 98%. Will things drop below that percentage? We will have to wait and see.
Here is a chart showing ten years of median single-family home prices in Cuyahoga County and list to sales price ratios.
Something else to watch is housing inventory. Single-family home inventory in Cuyahoga County has increased considerably compared to the past two years. Due to active listings being at historic lows, the increasing housing inventory is more reflective of fewer homes being sold rather than new listings.
Here’s what the current median single-family home prices look like in Cuyahoga County as of last month. We are still experiencing price appreciation despite the rapidly increasing mortgage interest rates. Last month, the median single-family home price in Cuyahoga County was $185,000. In December 2021, the median sales price was $180,000. While home prices are still appreciating year over year, the rate of appreciation has slowed considerably.
When compared to other parts of the country, home prices in Northeast Ohio are more affordable, which has translated into our market not seeing the relatively large price declines that other areas are seeing right now.
Despite the abrupt slowdown in housing, things will work out in the end, just like that ice skater. Here’s a longer video that shows what happened after his ice skating was disrupted…
At some point, the housing will pick up speed again and we will get back to skating along nicely! In the meantime, we’ll just have to get used to the colder water for a little while.
I hope that you found this information to be useful. I’ve been blogging for years. However, I’ve not really talked a lot about the Cleveland housing market, other than in my monthly newsletter.
Thank you so much for continuing to read my articles at the Cleveland Appraisal Blog! I appreciate you! I hope that you have a fantastic 2023. Like any year, there will be some good news and some bad news. But whatever this year brings us, let’s keep smiling. There’s almost always something to smile about!
This year is going to be an interesting year to watch when it comes to home prices. It’s vital that appraisers know how to measure markets and adjust for changes in the market. This week, I leave you with an instructional video from George Dell and Craig Gilbert. George has generously posted one of his classes they taught on YouTube, free of charge, to teach how to measure price trends using price indexing. I use price indexing on nearly every appraisal I complete. I learned this skill from George Dell.
If you’re an appraiser, or Realtor, learning how to price index the market will serve you well. I hope you enjoy his video!
In other news, I had a chance to visit with Bryan Reynolds on the Appraisal Update Podcast. He asked me to tell a joke off the cuff. I now know that I’ll never make it as a comedian. My wife has been telling me this for years.
Bryan is a great guy, a great appraiser and a great instructor! I’ve taken two of his classes online classes at Appraiser eLearing, and really enjoyed them! In fact, we recorded this podcast after a class of his that I was in that day. Here is our conversation if you’re interested in listening.
Have a great weekend!
If you enjoy listening to podcasts, check out mine. I hope you enjoy it! You can find me on Apple Podcast, iHeart Radio, Spotify, Google Play Music, Sound Cloud, Radio.com, RadioPublic, Deezer, Breaker, Stitcher, and other feeds.
You can also listen right here at Cleveland Appraisal Blog!
I am a member of the National Association of Appraisers. If you’re an appraiser, and you’re looking to join an appraisal organization, please check them out. The NAA is made up of fantastic appraisers from across the country who are working hard to keep their fellow appraisers up to date on what’s happening.
If you’re an appraiser or other real estate professional, and you’re looking to gain some new analytical skills, check out George Dell’s Stats, Graphs, and Data Science 1. I have taken George’s class more than once and I always learn something new! What I have learned has served me very well over the past couple of years as the market changed so rapidly. And it’s still changing rapidly! Find out how to measure those changes with data and good analysis! Click here to register.
Here are some links to other articles I think you might also enjoy…
Do You Have A Tech-Savvy Appraiser? – Birmingham Appraisal Blog
Appraiser Professional Goals – APPRAISAL TODAY
Are You Using Big Data in Appraisals? – George Dell’s Analogue Blog
Real estate trends to watch in 2023 – Sacramento Appraisal Blog
Winter Season – December Newsletter 2022 – DW Slater Company Blog
For my readers in the CLE area… here are some articles related to news in our local area that you may enjoy…
The 30 Most Beautiful Restaurants and Bars in Cleveland – Cleveland Scene
Making Cleveland More Walkable – Cleveland Magazine
The Great Blizzard Of 1978 – Cleveland Magazine