Will Greater Cleveland’s home price surge continue into spring, summer buying season?

CLEVELAND, Ohio — As homeowners, both current and potential, plan their next move during what typically is the busy spring buying and selling season, signs point toward prices continuing to rise.

Increases in interest rates after the record lows seen earlier during the coronavirus pandemic have not stopped average sale prices from increasing in all seven Greater Cleveland counties, as well as the state. Instead, a lack of homes for sale, as well as a lack of new home construction, are fueling a frustrating market.

“I wouldn’t call this a normal market,” said Carl DeMusz, president and CEO of the Independence-based regional listing service MLS Now. “I would certainly say this is a market that’s filled with anxiety for the buyers.”

Agents have largely said the same thing.

“The lack of inventory is still a big problem,” said Kathy Davis of Keller Williams in Solon. “We have Realtors calling – and I’ve done this too. I sold two in Solon, and I’m calling neighbors around those streets to say ‘we’ve got buyers. If you have any interest in selling, what’s your price? Everybody has a price, what’s yours?”

But even with potential hikes in interest rates, which could drive listing prices down, many prospective homeowners may feel like the result would be the same payment-wise and “they might as well buy now.

“Why wait if it’s going to be the same thing?” Davis said.

In other words, a lot of what many have seen is not likely to change in the short term.

Ever upward

To be clear, home sale prices were rising before the pandemic. In some areas, especially the inner-ring suburbs, it took years after the foreclosure crisis for values to again get to where they were in the mid-to-late 2000s.

Data compiled by cleveland.com and The Plain Dealer from the Ohio REALTORS trade association and MLS Now show that average home sale prices continuously rose from February 2020 to February 2022, both in the Greater Cleveland area and the state, even when the number of homes sold fluctuated in some months.

Only a few counties in the area – Geauga, Portage and Summit – saw occasional dips in prices when comparing a given month to the same month the year prior.

The data also showed that the dips and increases Cuyahoga County saw over the past two years largely tracked with what happened in the state overall.

All of this is likely not new news for many looking, selling or wondering why they are getting unsolicited calls from Realtors asking what price would lead them to part with their house. Such demand locally is evident in cities like Rocky River and Solon, but also more moderately-priced areas like Parma.

And it has become increasingly common for buyers to sweeten their offers by agreeing to forgo inspections or to pay fees associated with the sale.

Agents, residents and officials have said that the low interest rates fueled by the pandemic, along with a desire for more space while being cooped up led the market to heat up around summer 2020. A survey by Freddie Mac said the average interest rate for a 30-year fixed mortgage in December 2020 was 2.68%, compared to 3.76% last month.

Now, sale prices are to the point where what are normally “off” months have higher prices than in past spring and summer months, generally when the most sales activity takes place.

In Cuyahoga County, for example, the average sale price in February 2020 was $177,516. Last month it was $213,795. Similar patterns were found in the six other Greater Cleveland counties, with the price gaps in some counties – Medina and Portage – during the same months being even wider.

Other indicators, such as how many days a home sat on the market before it sold, also point to the cutthroat competition.

The same goes for Ohio as a whole. The average price last month was $235,359, up from $187,375 during the same month two years ago. Realtors said they have seen some signs of the market stabilizing, but the prices are still rising at a good clip.

“While the foundation of the Ohio market is solid, we’re continuing the (sic) confront the challenges of decreased inventory levels of homes for sale in many markets …” Ohio REALTORS President John Mangas said in a statement.

Not just yet

And heading into the spring, it does not appear the market is going to cool down anytime soon.

While the Federal Reserve has said it plans to raise interest rates this year to combat inflation – it approved its first hike this month and has said it will do the same six more times by Dec. 31 – that will likely not change the market in the buyer’s favor immediately.

These efforts, as well as inflation as whole, could have some effect at some point, though, DeMusz said. If inflation does significantly affect the market, though, it will likely be at a slower pace, he said.

But Davis said that she is just not seeing things slow down yet.

“I don’t think anybody’s going to say, ‘I’m waiting for prices to come down even though I know interest rates will go up.’ It would balance each other out,” Davis said.