Housing Statistics

[Tim Liston]

The 3rd quarter 2007 Lakewood home sale numbers are in from the MLS. Below are the updated Lakewood numbers. As before, the first dollar column below is the actual average for that quarter. The second column is “smoothedâ€Â￾ by calculating the weighted (by # of homes sold) average sales price for the most recent 15 months ended that quarter. The actual number of homes sold in each quarter is shown in the final column.

Q3 2007 $141,000 $148,430 169
Q2 2007 $152,400 $152,108 141
Q1 2007 $153,200 $147,370 103
Q4 2006 $148,900 $145,480 120
Q3 2006 $149,400 $149,760 153
Q2 2006 $156,300 $148,590 154
Q1 2006 $119,300 $144,861 88
Q4 2005 $142,700 $149,374 134
Q3 2005 $161,500 $149,668 150
Q2 2005 $155,400 $146,203 162
Q1 2005 $139,900 $142,415 99
Q4 2004 $135,400 $143,681 124
Q3 2004 $153,800 $143,365 174
Q2 2004 $145,000 $139,200 147
Q1 2004 $138,400 $137,847 86
Q4 2003 $135,000 $137,711 121
Q3 2003 $146,800 $137,085 185
Q2 2003 $136,000 $135,357 170
Q1 2003 $127,100 $135,453 94
Q4 2002 $137,600 $136,573 141
Q3 2002 $137,400
Q2 2002 $132,100
Q1 2002 $139,900
Q4 2001 $136,900

As you can see, the capitulation I predicted would take place, seems to be taking place. And I think it will get even worse. Unsold homes are at record levels, “easyâ€Â￾ mortgages have all but disappeared, buyers are still sitting on the sidelines, and we haven't yet seen the despair that typically marks market bottoms.

In fact, this 3rd quarter is the worst 3rd quarter since 2002. And frankly I suspect that if I had the raw data, and could calculate the median sale price rather than the average, it would look even worse, as I suspect the sale price of Lakewood's higher-end homes may be holding up better than the sale price of average or lower-than-average homes. The median really is a better indicator of the “typicalâ€Â￾ sale price than the arithmetic average.

Here is the url for the current report: https://www2.normls.com:442/market/pdf/ ... LS3Q07.pdf . You can tweak this url by changing the quarter and the year to see earlier reports.

Again, for what it's worth. One reason I'm watching this stuff is because I'm tired of being lied to when re-assessment time comes. The last three-year 13.1% increase touted by the city/county/whoever seems to me to have been a complete fabrication.

[Dee Martinez]

[quote="Tim Liston"

Again, for what it's worth. One reason I'm watching this stuff is because I'm tired of being lied to when re-assessment time comes. The last three-year 13.1% increase touted by the city/county/whoever seems to me to have been a complete fabrication.[/quote]

Your assessment (if youll excuse the expression) seems correct.
Lets not forget however, that when the mayor trumpeted the big purported increase in Lakewood housing values there were high fives all around the LO Deck. "See? A better place than Westlake and now we can prove it!"

Even with your "smoothing" your figures show that if I invested $136,000 in a Lakewood home 5 years ago, I would get about an 8 percent TOTAL increase if I sold it today, Factor in inflation and its not much better than putting $136,000 in the mattress.
When I mentioned this several months ago I was beaten about the face and arms by other posters.
Whether your impressed, depressed or just pressed by living in Lakewood, at least its helpful to see the realities.

[David Anderson]

Dee -

I believe your comments "several months ago" dealt more with investing specifically in rental property not primary homes. I was defending the prospect of investing in rental property - doubles and triples. Investing in a primary home has the same ROI implications here in Lakewood as it does anywhere else.

P.S. - my mattress does not give me 4-8% return. Where did you buy yours?

[Dee Martinez]

Good catch. Your memory is better than mine. Yes we WERE discussing rental property return although I am assuming Mr Listons numbers would include both single family and at least owner occupied doubles.

Nonetheless, the return appears to be NOT out 8 percent a year (my mattress couldnt do that) but 8 percent TOTAL over 5 years, or slightly more than 1.5 percent a year. That DOESNT keep up with inflation, DOESNT include necessary upgrades, DOESNT factor in property tax increases, energy increases, etc. Basically a wash, meaning money under the mattress.

Without Mr Listons "smoothing" its even uglier. A $4,000 total return in 2007 on a $137,000 investment? Take away the $9,800 real estate agents' fees and I'm almost $6,000 in the whole.

[Tim Liston]

Presumably the numbers include any Lakewood residence that was listed on the Northern Ohio Regional MLS, and sold by a NAR “Realtorâ€Â￾. These would include almost exclusively single family homes, and doubles. Maybe a couple quads but nothing larger. But it really doesn't matter what percentage of each, what percentage of total sales are Realtor sales, or any of that, so long as those percentages remained fairly constant during the time period in question, which is almost undoubtedly the case. That's because we're measuring the trend, the ups and downs, and not any absolute measure of worth. At least that's my intent. And because we now have six full years of data, and because we have smoothed it to better reveal the trend, past and future, the numbers are and will be very meaningful IMO.

Speaking of the future, my guess is that in two or three quarters we will see that the average sale price has returned to 2004 levels. And my guess is that they stay there for a while, at best, through 2009. And if that's the case, it will of course be really interesting to see if we get a 10% reduction in our assessed values in 2009.

[David Anderson]

I'm not sure exactly where buying a primary home is actually a good "investment" in pure ROI terms, Dee.

I have a single family home in Lakewood and incur all the costs you listed. Upgrades/repairs - interior and exterior - roof, windows; utilities; insurance; property taxes and mortgage interest (even though these last two are deductible it's far from break even).

My wife and I are also raising three small children in this modest home located in a nice neighborhood one mile from the new Hayes Elementary.

All I am saying is that folks take in a slightly different set of variables when buying for themselves verses buying for investment.

My home is a bad "investment" when you boil it down to dollars and cents. (My rental homes are tremendous investments as virtually everything is deductible and others are paying the mortgages - this is a second job, though.) However, given all the other non dollars and cents variables - safe neighborhood, walkable streets/sidewalks, access to parks and schools - my house is a great investment in my family and future.

Thanks for bringing this data to the forum, Tim. We all need to keep an eye on our county officials. Unfortunately, it's a zero sum game. If large numbers of our area homes are reduced in value and taxability, yeah, our property taxes may decrease but our officials will just increase some other tax some other way.

[Dee Martinez]

If large numbers of our area homes are reduced in value and taxability, yeah, our property taxes may decrease but our officials will just increase some other tax some other way.

Officials, particularly the school officials whose primary source of income is the property tax, are pretty limited in what they can do to raise taxes "some other way."
While I dont think its likely that property values will actually DECREASE, that would result in less revenue for the schools. Although under our funding system, increases in value DONT automatically translate into more revenue, without a separate vote.

The worst case scenario is stagnant or even lowered housing costs bringing in an influx of MORE students, without the corresponding increase in revenue to pay for them. Many of these students may be poorer ones in need for additional services. At this point, more families are moving out than moving in, but what if that begins to reverse itself?

Please note that the above is the accountant in me talking, not the mom. The mom wants every kid to have a chance, the accountant worries where the money will come from.

Schools get nothing from local income tax. So if a bachelor in a 2 BR apartment is replaced by a family with 2 kids, the schools have 2 more students to provide for and no additional money to do it. Its a bad system that almost punishes a local district for growth.

On your other point, about the "investment" value of the family home, of course you are right and I didnt mean to suggest that the personal and emotional concept of a family home can be or should be reduced to dollars and cents. There have been those here, who have tried to make that case in Lakewood's favor.

[David Anderson]

You are right, of course, Dee, regarding the options school districts have on raising revenue. I was opining more about the overall tax/fee structure in Cuyahoga County. They all relate and any reduction in one will likely be met with an increase elsewhere (the same argument can be made when considering whether to reduce Federal income taxes - state and local taxes will go up in relation leaving taxpayers in the same spot).

I think what Tim's numbers are suggesting is that it seems more than a viable argument that property values should actually decrease and adjustments to property taxes should made accordingly. However, we all know that the officials in charge will fight any medium or large scale adjustment downward because of the pressure that would be placed on Cuyahoga County's 33 school districts. Despite the trends suggesting that values and taxes should be adjusted downward for most Cuyahoga County homeowners they won't.

I'm not advocating for that to happen but am just suggesting that public institutions should avoid budgeting on rosy or even moderately positive economic forecasts. Hope for the best but plan for the worst.

Great post, Dee. But could you spell the connection between "lowered housing costs" and "an influx of more students." I'm not arguing with your statement but want to understand your thinking behind it. Thanks.