Malibu may be the most expensive place to live—an average home there costs $1 million—but Cleveland is the most affordable housing market in America with the average home price at $64,000, Caldwell-Banker found.
“It just shows how divergent America’s housing market is,” commented CNBC.
The flip side of Cleveland’s affordability is finding a place—not as easy as the rest of the country may think. Cleveland.com found a mismatch between supply and demand of mid-priced homes in markets like Lakewood and Ohio City, where listings fell by double-digit percentages this year. The general feeling is that the banks aren’t helping. Builders want to infill supply where its hot in Cleveland, but complain that they cannot secure a line of credit. Also, there’s a feeling that banks are holding onto a large supply of mid-priced, foreclosed homes, waiting for sale prices to recover.
The narrative that housing sales are always strong in the suburbs was deflated by six years of slow sales. Solon was one of the only suburbs with above average home sales in Northeast Ohio.
Analysts say the drop in housing values in Cleveland is the top reason we’re not seeing a pick up in new home sales. The Federal Reserve Bank of Cleveland reported that the region felt a 30% drop in home values from 2006 to 2013. Ohio, Florida and New York experienced the greatest negative change in home values in the country. Even if people want to sell their home, too many are “under water”— meaning they owe more than their property is worth.
And while Zillow expects 71.5% of the 253 markets it covers to see increases in home values over the next year, it reported that Northeast Ohio’s home prices weren’t expected to hit bottom until this fall.
The tight housing market hasn’t prevented residential building in downtown Cleveland. Downtown Cleveland Alliance reported that 1,000 new housing units are in the pipeline for 2014 in the central business district. Many will be an adaptive reuse of a commercial building into apartments. The rental market in Cleveland has hit historic highs in occupancy. High demand for urban living is sparking new development for Cleveland neighborhoods of downtown, Ohio City and Detroit-Shoreway (no coincidence, perhaps, that WalkScore ranked them the most walkable).
Downtown Cleveland’s 35% population increase in the last few years happened across a bigger geographic footprint, expanding the reach of the economic development upturn for retail (35 new restaurants opened), Cleveland Magazine reported. By comparison, the entire Cleveland-Elyria-Lorain metro region added only 1,900 housing units in 2011, according to the National Association of Home Builders.
Incentives for building in existing areas instead of farms and forests are the central theme of the VibrantNEO Vision. The regional sustainability initiative surveyed thousands of people in the area to discover that 71% drive alone, and 50% think their commute is easy. The majority support more compact housing options, and investing more in transit.
Despite the influx to urban centers, VibrantNEO found the “business as usual” trend pointing in the wrong direction for urban and multi-family housing options. They are predicted to drop due to continued abandonment by 60,000 units to 39% of the region’s supply by 2040. Their recommendation to the 100+ cities, counties, and agencies working on VibrantNEO is to consider how we want to capture those interested in living in urban and walkable places. A recommendation is for a package of incentives to increase the supply of walkable urban places to meet the rise in demand.
Twentysomething mobility sheds light on why Cleveland is experiencing an influx of residents to its most walkable neighborhoods. This infographic charts the flow of who’s moving in and out. It may surprise some to see New York “sends” Ohio (and its metros) more people than the other way around. Michigan is also a net exporter to Ohio of brainpower. This could be significant for Cleveland if it gets a better handle on the demographics of this group. For instance, what percentage are families and what kind of expectation for urban amenities do they bring with them?
The choice for Millennials to live in cities is no longer economic, it’s cultural, says Urban Land Institute. In its Emerging Trends in Real Estate 2014, ULI writes:
“The growth of generation Y and its impact on all sectors of commercial real estate could be the singular most dominant trend for many years. This group lives, works, and plays in different ways than previous generations. The impact will be felt by all real estate sectors. This generation will be more urban and less suburban; they won’t want to drive as much but will want to be mobile. From intown rental housing to collaborative office space to close-in warehousing to ensure same-day delivery from online retailers, Gen Y will be a noticeable force in shaping commercial real estate. All of these trends will have a significant impact on real estate. Referred to as a 'powerful engine' by an investor, this generation 'will be very good for real estate.'”