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Market Conditions - Feb. 2009 Major economic factors impacting supply and demand in the Northeast Ohio market are foreclosure activity and limited access to credit. These factors are currently causing extended marketing times and declining values. In addition, some areas are experiencing a high level of foreclosure activity resulting in an oversupply of homes. The national news reports of steep value declines do not apply to most areas in the Greater Cleveland Market since property values in this area did not have the large increases in values seen in other areas across the country. Essentially, they didn’t have as far to fall. There are segments that have had significant loss in value. Some urban and suburban areas with high rates of sub-prime lending have experienced a 50% to 90% loss in value from the highs seen in 2004 and 2005. In these areas, REO sales dominate the market. In many cases, the home values were inflated due to seller concessions added to the sales price. Also, artificially inflated sales prices and appraisals were made to create the illusion of equity to allow for a lower LTV to qualify for a loan. The bottom line is that most people really were not paying the recorded sales price. The cash equivalent value for most of these purchases was actually equal to only 70% to 80% of the recorded price. Another area of concern is low to middle priced new homes in developments built in the last 10 years. There is a large supply available and many builders are selling inventory at a discount. Also, a high level of 100% financing in this segment has hurt homeowner’s ability to sell or refinance. One more segment experiencing declines are homes with physical, functional or external loss. Examples include: Homes that are dated or have deferred maintenance. 2 bedroom homes in an area of 3 bedroom homes. Homes without a garage or basement where most others in the market have them. Also, homes on traffic streets, corner lots and near railroad tracks. Now that demand is down, these homes are difficult to sell. The good news is that in most suburbs and townships, as well as some urban areas, values have begun to stabilize. Many areas are only down 5% to 10% from the highs in 2004 and 2005. Some have not seen a decrease in value. You can count on McGreal & Company to carefully review and report market conditions. We monitor the following data sources and indexes:
Residential Housing Market Data: Data subscriber:
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NEOHREX: Northeast Ohio Regional MLS and Centralized Real Estate Information
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