Q3 New Home Prices Stable Despite Cost Increases

While many national homebuilders in other parts of the country are slashing home prices to reduce inventories and jumpstart lax sales, the effect on the Cleveland housing market has been minimal.

Home values in our area remain stable despite national woes. One primary reason is that unlike many large & mid-scale housing markets, Northeast Ohio has never experienced artificially inflated market values. Area home buyers have always gotten a good value.

According to recent NAHB-Wells Fargo affordability index documents, Cleveland has been rated as one of the most affordable markets in the country.

Many of the new home purchases which contributed to the stratospheric pricing in hot markets were driven by speculative investors as well as second home buyers lured by low interest rates.

In contrast, home sales in the Cleveland market are for primary residences. Demand continues to be driven by modest organic growth and is kept in check by the soft regional economy. Local home prices were not affected by wildly swinging highs and lows despite having to contend with labor, material and other national issues. According to Nate Coffman, Executive Director of the Home Building Association of Greater Cleveland, “One analyst pegs the Greater Cleveland market’s price decline at .62% from Q2 2006 through Q2 2007.

The oft-referenced housing bubble had a minor impact on home values in Northeast Ohio because there was simply was no bubble to burst.

Another factor that has helped keep the Cleveland housing market stable is that it is not dominated by national builders. Instead, local and regional builders control a larger share resulting in increased competition as well as a variety of housing options for the new home buyer.

True home appreciation has remained steady in the Cleveland area despite the rollercoaster price swings experienced in Phoenix, Las Vegas and other areas. Homes in the Cleveland area typically appreciate an average of 3-4% per year.

Despite rising labor, materials and energy costs, home prices have remained steady in our area.
A side effect of the soft housing market has incentivized encouraged home builders to reduce costs in order to maintain values. One group of Cleveland area builders have banded together with a novel idea to help maintain the status quo in promoting good local home values.
CB Cleveland is a buying group which has been created to obtain purchasing power that has to date only been reserved for large national builders. By collectively negotiating their purchasing, they reduce material costs and are able to pass the savings on to consumers. Area homebuyers benefit by getting the low pricing they see from national builders along with the one-on-one service of a local builder.

CB Cleveland is composed of a number of east side and west side builders who are committed to supporting our local economic interests and Cleveland area families.

You can learn more about CB Cleveland and their members at www.cbcleveland.com.