Cleveland Area Market Report – Q2, 2012
All real estate is local and every market is unique. To help REALTORS® and other housing market analysts get the most out of the plethora of data that is available, NAR Research produces a series of Local Market Reports (LMRs) which provide insights into the fundamentals and direction of the nation’s largest metropolitan housing markets.
- Prices are down 4.2% locally compared to a year earlier. Nationwide prices are down 7.4%.
- The relatively recent correction in local home prices wiped out most of the equity gained over the last 7 years. The housing equity loss locally was $42,800 compared to $39,267 nationwide.
- Employment has held up and is on an upward trend. The Cleveland area has added 2,800 jobs in the last 12 months.
- Unemployment in Cleveland (7.5%) is better than the national average (8.2%) and improving.
Share of total employment by industry
- The top three employment industries are Education and Health Services (18.7%), Trade/Transportation/Utilities (18%), and Professional & Business Services (13.8%).
State Economic Activity Index
- Ohio’s economy is stronger than the nation’s. 12-month change in Ohio was 4.9% compared to 2.7% in the U.S.
New Housing Construction
- The current level of construction is 51.5% below the long-term average.
- Reduced construction will limit new supply to the market, allowing demand to catch up with the inventory more.
- Construction is on the rise relative to last year, suggesting that the local inventory has stabalized.
Composition of Mortgaged Homes in the Area
- Subprimes make up a greater share of the local market than on average. There are nearly 10.4 prime loans for every subprime mortgage in the Cleveland market compared to the national average of 14.4.
Foreclosure and Delinquency Rates
- The 90-day delinquency rate for subprime mortgage in Cleveland fell from 29.5% to 28.3% over the 6-month period ending in May.
- The 90-day delinquency rate for prime mortgage in Cleveland fell from 6.32% to 6.26% over the 6-month period ending in May.
- The above suggests that local foreclosure rates will continue to decline in the near future.
- The Cleveland area is historically strong and more affordable than most markets.
- Monthly mortgage payment-to-income ratio for 2011 was 5.9% compared to 14.2% nationwide. For 2012 Q2, it was 5.3% compared to 14.1% nationwide.
- The Price-to-income ratio rose, but is better than the historic average. Median home price-to-income ratio for 2011 was 1.0 compared to 2.4 in the U.S. For 2012 Q2, it was 0.9 locally compared to 2.5 in the U.S.
The Mortgage Market
- In Ohio 24.6% of mortgaged homeowners are underwater compared to 23.7% in the U.S.
- 5.8% in the state are near negative equity compared to 4.9% in the U.S.
The strong price growth this spring has had an important impact on the housing market. Rising prices lifted many homeowners out of negative equity, improving confidence, enabling them to sell without a loss, and reducing the risk that they might roll into foreclosure. Stronger prices make short sales more attractive to banks and alleviate the weight of distressed sales on the sale prices of neighboring homes. According to Corelogic, the number of underwater homeowners eased by roughly 700,000 to 11.4 million in the 1st quarter of 2012 or roughly 23.7% of all mortgaged homeowners. An additional 2.3 million were in near-negative equity or had less than 5% equity, also a decline from the 4th quarter. However, given the large number of low-down payment FHA purchases in recent years, this latter figure is less threatening. Statewide, 24.6% of mortgaged homeowners in Ohio or roughly 531,000 owe more on their mortgage than the home is worth. Another 5.8% or nearly 125,000 have less than 5% equity in their home.
The official coverage area for this report includes the following counties: Cuyahoga County, Geauga County, Lake County, Lorain County and Medina County.
Some Notes on Data Usage
NAR Research uses a variety of data sources in preparing the LMRs.
- Housing Price and Sales Statistics – The National Association of REALTORS®
- Labor statistics – U.S. Bureau of Labor Statistics (Establishment and Household Surveys)
- Housing Permits Data – U.S. Census Bureau
- Foreclosure Data – Mortgage Bankers’ Association of America (MBAA)
- State Economic Index – Federal Reserve Bank of Philadelphia
Every attempt is made to include the best data possible. If one data source is not available for a particular metro area, a second-best solution is substituted. For instance, the Bureau of Labor Statistics (BLS) does not provide employment figures for all metro areas from its Establishment Survey. Where this data is not available, we have substituted figures from the BLS’s Household Survey.