Rumors of the death of new-home construction in Cleveland were not exaggerated. Once upon a time — waaaay back before the recession started — for-sale housing helped resuscitate urban neighborhoods like Ohio City and Cleveland Heights. When the recession hit, activity slowed to a crawl and buyers were few and far between.
But now a different picture is emerging. A brighter economy and heightened optimism about our city’s future are lifting the lid on pent-up buyer demand, rousing the housing market from its five-year slumber. Home sales are rising, prices are inching back to pre-recession levels, and stories of buyers getting outbid on homes are not at all uncommon.
According to a news release from the Ohio Association of Realtors, Ohio home sales climbed nearly 11 percent in March from the previous year — the 23rd month of consecutive gains. Here in Cleveland, home prices rose about five percent from January 2012 to January 2013 according to the latest information from the S&P/Case-Schiller Home Price Index.
Although firm numbers weren’t available, the City of Cleveland’s Department of Community Development also reports a sharp uptick in the number of market-rate townhouse and single-family projects being submitted for design review. That means more development projects are coming down the pipeline.
Perhaps just as important, a dramatic shift seems to be occurring as buyers recognize the risks that come with homeownership and decide to buy anyway. While it might once have been axiomatic to view a home as a three- to five-year investment, many buyers now see it as a long-term commitment. They also recognize that they’re investing in a community.
Take Matt and Heather Driggs: The couple recently sold their condo at Stonebridge Plaza after owning it for one year — to a Cavs player, no less — and opted to buy a new townhome at Waverly Station, a 22-unit development in Gordon Square. Despite choppy waters, Matt Driggs wasn’t scared to take the plunge.
“Real estate’s a risk — but it’s also our home,” says Driggs, who works as a property manager with theK&D Group. “We didn’t buy it to turn around and sell it right away. Somewhere down the road, in five to 10 years, I know we’ll see an upswing in this area.”
The Driggs’ corner townhome at Bridge Avenue and W. 58th Street, with big windows and a spacious roof deck boasting views of downtown, transferred this year for a hair shy of $300,000. That’s the tippy-top of the market for upper Bridge, an area once better known for drug dealers and prostitutes than swanky new townhomes.
Yet Driggs likes the character of the diverse, up-and-coming neighborhood — not to mention the fact thatHappy Dog is located just three tenths of a mile from his front door (yep, he’s mapped it). “We want to be part of something new, exciting and different. This is a great ethnic area.”
Upswing in Demand
Stories like this are an encouraging sign for David Sharkey, President and co-owner of Progressive Urban Real Estate, a city-centric real estate brokerage that pioneered the housing market in the late 1980s and rode every wave and crash of the last 25 years.
“Demand has improved,” he says, especially since the start of the year. “People are still targeted in what they want and where they’re looking, but it’s starting to open up a bit because markets are so tight. One of my buyers lost out on three deals — they didn’t get their bids in or were overbid. There’s still stuff not selling, but because it’s overpriced.”
Not that it’s easy. The dearth of well-priced, attractive homes on the market actually is a major problem; as buyers re-enter the market, they’re finding the pickings slim indeed. Some buyers are rectifying that by creating their own opportunities, identifying empty lots where they can build the house of their dreams in the neighborhood they love.
Greg Kobe is one. The empty-nester and his wife sold their Strongsville home in just four days and are now renting an apartment in the Federal Knitting Mills building in Ohio City until their custom home in Tremont is finished. The three-story detached home will feature an open floor plan and is located within walking distance of, well, everything.
“We just felt it was time to do something different,” says Kobe, who is in his mid-50s and works in finance for American Greetings. “In the suburbs, you always have to drive somewhere. I’m done with that. I don’t know if you’re ever really secure, so we decided: What the hell? Go for it! Get down here and enjoy our newfound freedom.”
Other buyers are motivated by the opportunity to be a part of the city’s recent upswing. “There’s a lot going on in Cleveland that hints this city is really experiencing a rebirth,” says Tim Dardis, who just bought a 2,500-square-foot home on Herman Avenue in Gordon Square and is taking on a gut rehab to transform it.
Developers Gear Up
As the housing market improves and qualified buyers come off the sidelines, developers are trying to provide more product to meet demand. Yet this is tricky in a market where commercial lenders still are requiring a slew of pre-sales before a shovel hits dirt. Today’s homebuyers aren’t always accustomed to buying a house off blueprints.
“In a lot of cases, you don’t have any product up, so you’re back to selling off floor plans like everybody used to do,” says Sharkey. “That kind of curbs demand a little bit — all of a sudden a buyer who wants a place to live sees it being as a nine-month time frame. They say, ‘Is that what I really want?’ If you build, you’ve got work to do as a buyer.”
Many of the buyers who are building custom homes in the city — like Kobe and Dardis — are actually taking out their own commercial loans and hiring a builder to do the work. That’s a far cry from the days when homes were being built “on spec” in Cleveland. However, some say tight lending has made builders more responsive to demand.
“It’s a lesson everybody has learned since the crash – you spend your dollars a lot more wisely now,” says Eric Lee, a salesperson for The Bluestone Community, a condo project in Cleveland Heights that is being developed by the Orlean Company. Bluestone only has one unit remaining in Phase I; Orlean recently broke ground on Phase II.
Like many projects these days, Bluestone is entirely self-financed — Orlean bought its note back from the bank when the market crashed and has been spending its own cash since to build out units. So far, 51 of the planned 80-some units are completed. Many of the homebuyers work in the medical field in or around University Circle.
The market’s resuscitation also is bringing other stalled-out housing projects back to life. They include Trailside at Morgana Run, a large community of new homes being developed by Third Federal Bank and built by Zaremba Homes. Trailside already has broken ground on its first 10 new homes, which are attractively priced between $126,000 and $132,000 and offer easy access to the Morgana Run trail in Slavic Village.
The Avenue Townhomes in downtown Cleveland and the Woodhaven community in Fairfax are two more Zaremba projects that might come back to life. Mothballed during the recession, the builder intends to break ground on new units at both sites later this year, according to Lisa Saffle, Director of Sales and Marketing with Zaremba Homes.
Perhaps the most interesting example of an urban housing comeback story is Waverly Station, which developer Mike DeCesare stubbornly pursued throughout the recession, cobbling together land and creating a 22-unit community where once a modest six- to eight-unit cluster of townhomes was envisioned.
Turned down by banks even after he’d secured pre-sales, DeCesare turned to a small group of friends, neighbors and a local nonprofit to finance his for-sale development. One might say that he “crowdfunded” the project by turning to individuals who were already invested in the neighborhood and wanted to see the project succeed.
Today, DeCesare has completely sold out Phase I of the project, which consists of one eight-unit building. He also recently broke ground on the next phase with four pre-sales. The project is now being financed by Village Capital Corporation.
“It’s not a vision off a piece of paper anymore; it’s actually reality now,” says DeCesare, who lives in Gordon Square and has built dozens of homes there. Waverly Station has picked up so much that he’s raised prices on remaining units.
“This is a development that people can feel, see, look, touch and embrace — it’s more than a leap of faith.”
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