The Cincinnati Real Estate market is regaining some of it value according to an article in the Cincinnati Business Journal. The local market ranked #14 out of 50 national metropolitan areas based on value increases over the second quarter. Nationally home values are up almost 8% in the second quarter vs the first quarter. However Cincinnati gained 10%. As a region the Midwest has seen the strongest price increases in real estate compared to last year.
The challenge continues to be that all real estate is local. Some desirable areas of Cincinnati actually appreciated as the housing bubble burst and continue to hold their value. This situation speak volumes about the strength of our community and our local market
In recent days I have had a few phone calls from first time home buyers asking me if they should still buy a house even though they missed the $8,000 tax credit. In some cases they could not find the right house, or they did not hear that the credit was extended. Regardless of the reason they missed credit I tell the same thing; YES!
There are a number of reasons that this is a good time to purchase a home.
First is that over the long term Real Estate has been a solid long term investment. Over the years Cincinnati has seen relatively stable property value appreciation. Our property values did rise and fall with the rest of the country over the last 6 years, but we did not have the dramatic soar and crash like Miami, or Las Vegas. Invest in a home because you love it, not because you are looking for fast appreciation.
Second thing I point to is the closing gap between Rent and Ownership costs. With property values AND interest rates lower the gap between Rent and Ownership has shrunk substantially. According to a national study by Marcus & Millichap Real Estate Investment Services the difference between the cost of Rent and Ownership has decreased to as little as $100 a month in some markets. The study looked at 43 major markets and found that using the median home price and median rent the cost difference was $256. That is the smallest gap since 1993.
The third point is that there are still very good deals to be had. There are sellers who want to sell their home now and are willing to negotiate on price and terms to get the deal done. While it is still somewhat a buyers market sellers are also feeling the home values stabilize and may not be ready to give their home away in a fire sale. They key point I try to emphasize is that interest rates are at record lows. Home values have returned to 2003 levels, but the interest rates today are lower. Bottom line – the price may be the same but it will cost you less to buy the same hose today as it did in 2003 thanks to low interest rates.
For more information please e-mail me or call me at 513-518-1140
Yesterday the Case-Shiller home price index came out, and it had some positive numbers. The C-S index looks at 20 major metropolitan real estate markets and watches the change in home sale prices on a monthly basis. The index provides numbers that are normalized for the home prices in the first quarter of 2000.
Because Cincinnati is not one of the markets observed by the index, we have o draw some conclusions from our closest neighbor, which is Cleveland. The below chart shows the decline and slow rebound of the housing market over the last 12 months in Cleveland.
Case Shiller Home Price index July 2009 - Cleveland
What we see in the numbers is that in February, March, and April of this year home values in Cleveland fell below the their 2000 value levels for the same months. But we also see an increase in home values as the spring and summer months arrive. In Cincinnati we saw a similar trend, driven by a number of factors including the season, first time home buyer credit, and improving macro-economic conditions.
If you have been thinking about moving up into a large home this may be the time to make the move. As prices begin to rise proportionately more expensive homes will gain in price faster than lower priced homes. A $500,000 home will cost $550,000 if it gains 10% in value, while a $200,000 home will cost $220,000. That is a $30,000 difference. call me today if you are interested in deeper local market analysis! 513-518-1140
New information from Marketwatch.com points to a slowing foreclosure rate in leading indicator states. Their conclusion is that the number of foreclosures is in decline due to some of the aggressive measures being taken by banks, and government agencies to keep families in their homes.
Their research shows a slight drop from 84,534 to 84,291 in the number of properties repossessed by lenders following foreclosure November over October. But that’s off nearly 21% from September’s 106,415 REO filings. In California Foreclosure Index numbers show REO filings in the state down to 15,978 in November. That is a decrease of 6.55% from October and off nearly 50% from September.
The hope is that as these foreclosure rates slow there will be fewer foreclosed homes on the market, which will help stabilize home values. The article however does not take into account the overarching economic slow down. Although the major real estate challenges of 207-2008 are being resolved, I’m not sure if there is an eminent rebound. The Cincinnati real estate market remains relatively steady, with prices across the board lower than a few years ago and activity levels down as well. Our real estate values did not balloon like Florida, Arizona and California so subsequently we did not experience, for the most part, the bubble bursting.
There is some good news recently put out by the Cincinnati Board of Realtors. According to the sales numbers the last 4 months have seen increasing home sale activity, a good indication that the housing market is beginning to recover. An even better secondary metric is that the overall inventory is dropping. This means that more houses are being sold than are being put on the market. Generally speaking a balanced market carries about 5 months of home inventory.
More sales and less inventory helps to return demand to a steady level. It is this relatively static demand that has given Cincinnati real estate has historically appreciated 2% each year. Although modest, it is steady and the recent positive changes in the short term market point to the fact that we will soon return to slow and steady long term appreciation.
Month 2008 Home Sales Inventory
January 1,130 13.31
February 1,334 11.32
March 1,557 9.75
April 1,636 9.49
May 1,913 8.38
I was talking to a real estate agent yesterday and we discussed the inventory of homes in the greater Cincinnati area. I was very surprised to hear them terribly concerned about their perception that there are 11 months worth of homes on the market right now. I questioned his concern and did some research on my own at Housing Tracker.
The short story is that there are 64 more homes on the market today than there were one year ago, 1/2% more inventory than in 2006 and 1.8% more inventory than 2005. Now it is true that prices have gone down slightly; for the median home the drop since 2005 is 3.35% and for higher priced homes 4.45% over the same time period. Lower priced homes have dropped 5% since 2005 but also did not experience the price spike and hard correction that the median home and luxury home experienced.
What this translates to is that if you are in a median priced home it is the best time to move to a bigger space if you need to. I know it is against everything that we have been hearing on the news but the reality is that the price of the home you want is closer to selling price of the home you have right now. Math does not lie – the difference between a median and high priced home this week is $90,000. One year ago that difference was $97,000 and in 2005 the difference was $94,302. In real dollars upgrading is ALWAYS a good move in a down market. If your Cincinnati real estate agent is not telling you this they are just plain wrong.
Week Inventory 25th Percentile Median 75th Percentile
11/28/07 11,415 $99,900 $149,900 $239,900
11/28/06 11,351 $104,900 $158,000 $255,000
11/28/05 9,418 $104,900 $154,900 $249,202
The challenge continues to be that all real estate is local. Some desirable areas of Cincinnati actually appreciated as the housing bubble burst and continue to hold their value. This situation speak volumes about the strength of our community and our local market
