The average New Home Sales price is much higher and has had more variance in the last four years. Despite a couple of pauses in March and May, it too is trending upward.

Looking at average price per square foot was even more revealing.


Here we see existing homes moving in a narrow band and new homes showing more variance, but we also see a distinct decline in the price per square foot of new homes at the end of 2006 and continuing through most of 2007 so far. New home prices have fallen in Cleveland so much so that there is hardly a premium for new homes over existing as demonstrated by the fact that the Existing and All Sales lines have converged.

In most housing markets there is a premium that home buyers are willing to pay for a new home, presumably for the newness and the utility of less maintenance and current features and functions like energy efficiency.

It appears that builders in Cleveland are discounting away this premium. This makes sense as builders have more incentive to make prices fall to clear the excess inventory, while existing home owners are more likely to sit tight.

While prices are being sticky, recorded closings have fallen. Comparing closings through July for 2007 vs. 2006, existing home sales are down approximately 17% while new home sales are down 22%. To keep new home sales moving at this lower pace, the premium for new homes has disappeared but existing home prices appear to be providing a floor. So the question becomes, in future months will we see the new home premium in Cleveland become a discount?

Stay tuned, or get a premium subscription to Neighborhood Insight to track it yourself. Neighborhood Insights can reveal trends in home prices, including new and existing homes, for over 275 markets down to the neighborhood level. In Cleveland that means this analysis can be continued into Cleveland’s five counties, hundreds of census tracts, across all of its zip codes, or even into specific named subdivisions. Find out how Neighborhood Insights might be able to help you make better housing decisions.