Fresh Water Cleveland, 11/17/11
If the housing crisis were an episode of Survivor, then David Sharkey would be one of the last, hardy souls left on the island.
The real estate agent, developer and co-owner of Progressive Urban Real Estate (PURE) rode the crest of the housing wave from the early 1990s through the fiery market crash of 2006. Indeed, many industry insiders would say that Sharkey and his longtime partner, Keith Brown, pioneered the market for urban living in Cleveland.
From its offices in the old Polish Daily News building, PURE began selling stylish new townhomes in Tremont in the early ’90s. These improbable units went up in a spot where, just a few years before, vacant lots sold for a buck and arson watches on derelict, boarded-up homes were more common than art walks.
Fast forward a few years and PURE’s risky investment strategy began to seem like sheer genius — swank Tremont homes regularly sold for $300,000 and up. Indeed, from 1990 to 2005, Cleveland’s housing market was the poster child for the city’s much-vaunted comeback. Thousands of new homes, townhomes and condos were built and sold, contributing to the revitalization of places like Tremont, Ohio City and Little Italy.
But that was then. Today, Sharkey is the sole remaining employee in PURE’s Ohio City office, and he is struggling to keep the doors open with a handful of city-savvy real estate agents.
“For young people, it used to be a rite of passage to own your own home,” Sharkey says. “Homeownership has always been a part of the American ideal.”
These days, the very future of that ideal is in question. Cleveland’s housing market is plagued by foreclosures, low sales prices, homeowners who can’t sell their (often underwater) homes and buyers who can’t qualify for good loans.
During a recent forum at Cleveland State University, Lawrence Yun of the National Association of Realtors pointed to signs of stability in the regional market, yet also said that low prices and distressed sales would likely continue for the next few years.
Despite the lousy headlines, however, there are a few areas of strong activity in the housing market. Longtime builders have reinvented themselves as small-scale rehabbers, new construction projects are slowly coming back to life thanks to an infusion of stimulus dollars, and wary buyers are emerging from the sidelines.
Prime examples of such buyers are Mike Koch and Joseph Peevyhouse, a couple who recently bought a new, single-family home in the Tremont Lane development on West 8th Street. “We felt that it was a good time for us to build a home,” says Koch. “We’re excited about all of the growth in Tremont and felt this would be a good investment for us.”
Those words are music to the ears of Joseph Del Re, Project Manager with Zaremba Homes. “The stimulus program basically kept builders like us alive over the last few years,” says Del Re, whose company began rehabbing foreclosures two years ago to stay afloat during tough times, and has now sold more than a dozen. “There are opportunities for development in the city, but you have to be creative.”
Still, the art of selling homes in today’s market requires as much patience as creativity, says Sharkey. Cost-conscious buyers now spend a lot more time looking for homes than in the past, and are fine with signing a lease if they don’t find the perfect fit. “Renters will often test the waters when their lease is up,” he says. “They’ll take their good old time to look for a house — and that’s measured in years, not months.”
It’s not that young professionals and first-time buyers aren’t buying homes, he says. The numbers are just smaller because of the fear and austerity born out of the last recession.
“There’s a new way of life in America, and it’s all about the bottom line,” notes Sharkey. “When it comes to buying houses, people need to know they’re getting a good value.”
In a proactive effort to lure buyers off of the fence, Sharkey, Del Re and other builders have tapped into the Neighborhood Stabilization Program (NSP), a federal stimulus program that aims to spur redevelopment of foreclosures. This year, Sharkey and Brown bought two bank-owned homes under the auspices of Civic Builders in Tremont and Detroit Shoreway, and gut rehabs of both properties are in full swing.
“When people walk into these NSP homes, they see they’re getting more for their money,” says Sharkey. The program allows qualified individuals to purchase a rehabbed home for what amounts to less than its actual cost. Other incentives include tax abatements, energy-efficient features and a forgivable second mortgage.
“The NSP program is important because it allows a developer to do the right thing when rehabbing these homes,” he adds. Without this program, many bank-owned homes that are worth salvaging would be snatched up by investors or face the wrecking ball.
Most first-time buyers still won’t consider purchasing a bank-owned home as-is, he adds – no matter how cheap. “When homebuyers see that the pipes are stolen and the sinks are ripped out of the walls, they’re a bit leery, even if it looks worse than it is.”
Custom homes are another area where urban-focused builders have managed to stay active in recent years. One prominent example is a distinctive new home that’s being built by Knez Builders at the corner of W. 11th and University in Tremont. The urban mansion boasts modern design and a wall of glass that faces downtown.
Hotspots like this one are a sign of where the housing market is headed, Sharkey says, as skeptical homebuyers are willing to invest in areas with proven market appeal. “Tremont is still a hot market, and there are strong pockets in neighborhoods like Ohio City, Detroit Shoreway, Clifton-Baltic, West Park and Little Italy, too,” he says.
Because the new construction market has slowed down since the bubble burst, older, fixed-up homes have regained favor, Sharkey says. This is in part because rehabbed homes are perceived as a good value and buyers are leery of new construction.
Still, some new construction projects are defying this trend. One such development is Stonebridge Plaza in the Flats. The few remaining luxury condos here are value-priced and offer a location that buyers seem to feel safe investing in – even in this market.
“There are a lot of good things happening in downtown Cleveland, and Stonebridge is part of the excitement of downtown,” Sharkey says. Today’s buyers, he adds, want to be close to other urban amenities and to feel like they’re buying into a community.
Buyers also expect green amenities to be standard, and that’s another trend builders are capitalizing on, he says. “Being environmentally friendly, doing the right thing and spending less on utilities is inherent to the new, younger generation of buyers.”
For qualified buyers who are venturing into the housing market for the first time, getting a loan is not as hard as it looks — as long you have good credit and a down payment. Appraisals have also taken a hit, yet this can work in a buyer’s favor.
While home sales remain slow in many areas, high occupancy rates for apartments in places like Ohio City and University Circle indicate strong demand for urban living. Many prospective buyers are simply choosing to rent until the market recovers.
This eventual market recovery is something that Joe Del Re of Zaremba Homes is banking on. Zaremba recently broke ground on 10 new single-family homes at Trailside at Morgana Run, a 100-plus unit development that is adjacent to Third Federal’s headquarters in Slavic Village.
“People are still interested in affordable, new homes in the city,” says Del Re, who is confident the homes will sell because they’re green-built, located next to a new trail and green space and priced under $150,000. “We’re building homes for everyday people.”