Freedom and the 4th of July + A Market Update

To borrow a line from my father, thank God my grandma and grandpa didn’t miss the boat!

My dad fought in World War II for the freedom of people he would never know. He, like thousands of others, volunteered of their own free will. He, like many of the other fathers and one mother on the street where I grew up dedicated a portion of their lives to the service of our country.

I believe it’s because they understood the benefit of living in the USA compared to other countries. My dad told me a story about his aunt, and as his story goes, whenever she was asked if she missed the old sod (Ireland), her reply was, “If it were any good, I wouldn’t have left it.” Remarkably, none of the adults on our street ever talked about their service, let alone bragged about it. As an adult, I heard stories of other men's wartime experiences. One day, I asked my dad why he never spoke about the war or his time overseas. He looked at me, very seriously, and said, “Why would I want to talk about the worst part of my life? I lost a lot of good friends.”

Thanks to our parents, growing up on Harley Ave. was like living in a movie. On summer weekends, the adults would gather on a neighbor's front lawn, enjoying a few drinks while we kids ran around playing and catching lightning bugs. We’d put them into a glass jar with grass and punch holes in the lid so they could breathe. The next morning, I'd wake up early to check on our catch, only to find the lid off and the lightning bugs gone.

Our parents handled things a little differently than they are handled today. I was reminded of that when I was driving down a street and saw one of those “Slow Down We Love Our Children, Please Drive Carefully” signs. I flashed back to an incident from my youth. The fathers of Harley were not the sign type, I guess they figured the speed limit sign at the end of the street was enough. They had their own way of dealing with speeders. I remember a car speeding down the street, and one of the dads threw a beer bottle at it, hitting the trunk. The car screeched to a stop, and all the dads stood up, yelling, “Slow it down! We have kids playing on the street!” The driver apologized and drove away slowly.

The Fourth of July was a grand celebration. We all decorated our bikes and wagons with red, white, and blue crepe paper streamers, and march down the middle of the street. The parade started with the loud blast of a train whistle from a neighbor, followed by hot dogs and Little Toms in a neighbor's yard. After a long day of festivities, we’d pile into the car to see fireworks. It was always a great day.

Back then, every house proudly displayed a flag. I was taught by their example how lucky we were to be in America.

Shortly after September 11, I was at my parents' home for dinner, and I asked them how 9/11 compared to Pearl Harbor., The biggest difference, they said, was that on 9/11, they watched the events unfold live, while news of the attack on Pearl Harbor came much later. For Pearl Harbor, they said they had an idea that something like that was going to happen to pull us into the war and 911 was out of the blue.

As I write this, I can’t imagine what my parents’ and grandparents' lives were like. My daughter is 18, the same age my dad was during the attack on Pearl Harbor, and around the age my grandparents left their country without their parents. My son is 12, and by that time in my dad’s life, he had already lived through the Great Depression.

It might sound corny, but I wish my kids could have had a childhood like mine. I try my best to instill in them an understanding of the sacrifices that were made, but as an adult, I still don't fully grasp it myself. I am reminded of the story of an immigrant coming to America because its streets are paved in gold, and two generations later, the gold streets are just streets.

The Market Update

I recently attended a market update session with Brian Buffini, a real estate industry guru. He opened with an optimistic outlook, “Despite a barrage of headwinds the market is facing, like reductions in sales volume, record-high home prices, and elevated inflation, inventory has been increasing over the summer and we’re seeing an incredible trend in the direction of normality.”

Brian’s idea of “normal” is a six-month supply of available homes and an interest rate of at or below 6%. However, based on my 30 years of full-time real estate experience, I believe Brian might be a bit too optimistic—perhaps displaying some ‘irrational exuberance,’ if you will. In my view, what we are experiencing now is ‘The New Normal.’

Allow me to explain; The last time we had more than six months of inventory was eight years ago. In February of 2016 we had 6.36 months of inventory. By the end of that year, the monthly yearly average was 4.5 months. Since then the landscape has changed dramatically:

In 2020, the average number of months of inventory was 2.4.

In 2021, it dropped to just 1.1 months.

In 2023, it slightly increased to 1.2 months, a figure that remains the same for this year’s average.

These numbers indicate a persistent trend of low inventory, far from the six-month supply that some might hope for. This trend reflects a significant shift in the market dynamics not caused by the pandemic and I think it's crucial for us to adapt to it.

Market Snapshot: Western Suburbs of Cuyahoga

According to our multiple listing service, the western suburbs of Cuyahoga County recorded 4,406 total sales last year. This number is almost identical to the 4,402 sales in 1994, the year I began my real estate career.

To provide some context, from 2010 to 2019, the average number of sales in this region was 5,612 annually. Even with the pandemic, we saw a significant increase, with 5,847 sales in 2020. This upward trend continued into 2021 when we had an impressive 6,065 sales.

As you know from my preaching, it's all supply and demand, so let's look at demand. 72 million in the Millennial Generation and 45.5 million of them are in the household formation age range. $1 in 2020 is equivalent to purchasing power at about $1.21 today, an increase of $0.21 over 4 years. The dollar had an average inflation rate of 4.97% per year between 2020 and today, producing a cumulative price increase of 21.39%. according to the U.S Bureau of Labor Statistics Average sale prices for single-family homes over the last 4 years have gone from $178,809.00 to $252,622.00.

It is common to hear that the Millennial Generation’s idea of the American Dream is different than that of mine or my parents because theirs does not include home ownership. I respectfully do not agree. I think they would like a home but are between a rock and a hard place. As home prices rise, the amount needed for down payment goes up, and rents are increasing exponentially.

Here is some sobering data taken from a survey from Yahoo Finance: 52.84% of the survey respondents say they are paying more than 32% of their take-home pay for rent and 7.3% say they are paying more than 50%. It's tough to get ahead and save for a down payment when you are paying close to half of your income for rent. The only thing that will fix this market is more affordable housing.

Ending on a Positive Note

This market continues to be the strongest seller's market we've seen in the past 30 years. If you or someone you know is thinking about selling, now is the perfect time to take advantage of this unprecedented seller's market. Your referrals are the lifeblood of my business, and I am grateful to have you as part of my extended family.

Please drop me a line to share your summer stories or discuss how I can assist you with your real estate needs. Let's make the most of this remarkable market together!

Thank You!

Dennis Rath

Per usual please don't hesitate to reach out about any questions you may have!!