Are real estate prices in Cleveland too good to be true?

March 14, 2007 9:48 AM

Are real estate prices in Cleveland too good to be true?

My wife and I are moving to Cleveland for four years of medical school at Case. When looking at housing options we noticed the very affordable cost of buying a home.

So what's the deal with these $60 - 80k homes in Cleveland Heights? Is it a stagnant market? Why are there so many for sale? If we buy one of these are we going to have trouble selling in four years? Are we going to lose money? Should we just be looking for a rental?

It looks like a great neighborhood, close to Case, University Cir., Shaker Square, Tremont, etc. with nice little houses and tree-lined streets. In our current mid-sized city, houses in such a neighborhood run $200k+

Should we be looking somewhere else that meets these criteria?

[sidenote] I've found a wealth of great info about Cleveland here on AskMeFi. Thanks! We're looking forward to the move.

posted by Grundlebug to work & money (13 comments total)

Some data about Cleveland Heights.

The official site.

At the risk of pointing out the obvious, or possibly the offensive, areas with 41% African-American inhabitants often aren't valued by real estate folks the same way that areas with 100% white inhabitants are.

Looking at the demographic data, though, it seems like a pretty decent neighborhood; in particular it seems to have escaped the high crime rates that plague many African-American neighborhoods.
posted by ikkyu2 at 10:00 AM on March 14, 2007

Cleveland is the poorest city in America, a rust belt city that lost industry and hasn't found a new niche yet. So yes, the population is on a decline and those home prices are realistic. Anecdotally, I know someone who bought two houses (on the same lot; one he lived in and one he rented out, both in great shape) in Cleveland for $145k a couple of years ago.

Cleveland Heights is a great neighborhood, but whatever you do, don't speed! I think the town makes much of its revenue through speeding tickets.

I just left Cleveland in May; I went to law school at Case. Feel free to contact me via email if you have any other Cleveland/Case questions.
posted by amro at 10:05 AM on March 14, 2007

My wife and I moved to Cleveland in 2002 for her to go to med school at Case (congrats!). We moved away upon her graduation in 2006.

We lived in an apartment for the first year ("The Roosevelt" on Overlook Road, horrible landlord, avoid that place!).

We then bought a house much like those you listed here in Cleveland Heights. We lived there for three years and sold it for pretty much what we paid for it (which was fine with me, our goal was to avoid paying rent, not make money, on that piece of property).

I think we made the correct decision and my only regret was the first year in the apartment. Like any house (especially an 80 year old house, like most of Cleveland Heights) there were unexpected expenses and hassles.

My favorite neighborhood in Cleveland Heights are the long streets between Lee and South Taylor, that is, Monmouth to Ormond Rds. The streets are quiet, there's a real neighborhood vibe, and Lee Road has good dining. If I was moving back I'd look for a house on those streets and pay a premium to live there. Speaking very generally, houses south of Mayfield cost more than those north of Mayfield, as some of the neighborhoods north of Mayfield are considered less safe.

No one can tell you what the Cleveland real estate market will be like in 4 years. Cleveland Heights is a good town and in my opinion the best place to live near Case (if you have a car, which you need in Cleveland anyway). In my opinion the whole region is stagnant, so you do take a risk to sell a house. However, I think if you don't plan on making much money in the transaction, and just look for a good place to live, you'll be fine.

We used a realtor with Smythe Cramer (now Howard Hannah) who was very patient, understood our needs and took care of us. I feel strange putting her name in a public forum, but can email you if there's an address in your profile.

I'm happy to follow up if you have more questions.
posted by These Premises Are Alarmed at 10:05 AM on March 14, 2007

My gf and I moved to Cleveland a couple of years ago to work at Case, and wondered exactly the same thing. Feel free to email me (email in my profile). Here' my feeling on the matter:

(1) Real estate in Cleveland is generally incredibly cheap. You can afford a palacial 3-4 bedroom house for under $250,000. I don't know about the specific houses in your links, but its not inconceivable that you could get a nice house in CH for ~$100K. So in that sense its a good place to buy - you can get very good housing stock for much less than in most other areas.

(2) Reat estate in Cleveland is, generally speaking, not a good investment. It has not recently, and will not for the foreseeable future, see anything near the appreciation that you see in other metropolitan areas. In that sense, its not a good place to buy. If you are considering being here only for the 4 years of med school, and will be carrying med school debt, I would advise that you rent (renting in Cleveland is super-cheap), and put whatever money you save into a better-paying investment.

(3) Everyone will tell you to buy in Cleveland or Shaker Heights, because thats where everyone affiliated with Case lives. Both areas also have high tax rates relative to the rest of the area. Unless you have school-age kids, you may not recoup your property taxes when you sell your house in 4 years. [We wound up buying a house near the lake in the city of Cleveland, just east of Bratenahl].

(4) The housing market in Cleveland is *very* depressed right now. Many houses that I know of in various locations have been on the market 9 months or more. And given Cleveland's economy, there is no sign of a turnaround in the next few years. Other than Case & the Clinic, there simply isn't enough to attract new buyers to the area.

So, to answer your questions. IMHO:

Is it a stagnant market? Yes

If we buy one of these are we going to have trouble selling in four years? Are we going to lose money? Very likely, on both counts - especially when you factor in closing costs, property taxes, etc.

Should we just be looking for a rental? Yes.
posted by googly at 10:05 AM on March 14, 2007

Based on his/her post, I agree with googly. Buying a house to avoid rent in the short term knowing that the house will not appreciate is a bad idea. If you plan on settling down in Cleveland, thats a different story. Factoring things like closing costs, taxes and the fact that the majority of your initial house payments will go towards interest (while they are tax deductible you will not recoup the interest when selling it - its not equity) you will most likely find that renting will be a more sound decision.
posted by premortem at 11:02 AM on March 14, 2007

The house we bought in Cleveland Heights last year (between Cedar Fairmount and Coventry) is beautiful and we love it. Coming from Chicago (and having grown up around Boston), I couldn't believe how inexpensive it was -- the insured replacement value of the house was double what we paid for it. While we were going through the process of negotiating the price with the previous owner, we kept wondering why he seemed so stingy when there were so many other similar houses on the market (and for so long). Then I looked at what he paid for the place in 1983. Whatever he did, he was going to lose a chunk of money on the deal adjusted for inflation, and that's before factoring in the cost of any improvements he'd made.

We're planning on being here for a long time and it made sense for us to buy. If I were planning on moving after a couple of years, I'd probably rent just to avoid the worry of whether I'd be able to unload the house at the end. Rentals aren't too expensive and if you avoid the beat up student apartment-y buildings around Coventry, you should be pretty happy.
posted by MarkAnd at 11:57 AM on March 14, 2007

Oh and also, Cleveland Heights extends pretty far away from Case and that's where the $50,000-80,000 houses are for the most part. When we were looking, the houses between Cedar Lee, Coventry and Cedar Fairmount (which is sort of the Case-situated stuff) were more expensive.
posted by MarkAnd at 12:04 PM on March 14, 2007

Ditto about the stagnant market. I grew up in Cleveland and have family there still. Regarding Shaker Heights, take a close look at the property taxes, they are some of the highest in the nation and are raised with some frequency. Essentially any gains you get from appreciation will be eaten up by taxes.

It is a great place to live though.
posted by hilby at 12:31 PM on March 14, 2007

Speaking as a happy Shaker Heights homeowner: If you only plan to stay in Cleveland 4 years, buying probably does not make sense, because you'll likely end up selling within the same soft housing cycle. You should rent. If you look hard enough, you'll be able to find a great apartment. If you only own for 4 years, any modest equity you build will be eaten by R.E. taxes, maintenance costs, transaction costs, etc.

If you plan to stay in the same house for at least, say, 6-7 years, it will likely be a good investment, as long as you don't overpay. You'll get sufficient appreciation as well as the tax benefits. Don't forget that right now is a true buyer's market--prices are very low. It's a good time to buy almost anywhere in the country, as long as your holding period is long enough. (Conversely, it's of course a horrible time to sell).

I've always said that Cleveland is a great place to get rich, because you can get a high-paying job with one of the national companies here (or, for example, The Cleveland Clinic), and you can bank that money instead of blowing it on your monster house payment (while still owning a really nice house in a great neighborhood).

P.S. - If you decide to start a family Shaker Heights is a great place to raise the little ones. We have a number of doctor friends with kids in Shaker Heights.
posted by onesix18 at 1:20 PM on March 14, 2007

Well, I grew up there, and I still have family there, so I'll give you my perspective about what's going with the housing market. Historically, Cleveland Heights has been racially mixed and is committed to being racially mixed and this has created some problems. (although I still marvel at the commitment to racial diversity) Basically, the high school when I went there was about 70% black and now that percentage is even higher. Frankly, a lot white families are uncomfortable with this percentage and have over the years either pulled their kids out of the public schools or moved away. Currently, the schools have a lot of issues (they've been rated as failing) All of my friends from high school (both white and black) have pretty much moved to surrounding suburbs (south euclid) because they feel the tax rates are too high when you consider that the schools have been rated as failing. So basically the high inventory and low housing prices are driven by the schools. It took both my brother and my father over a year to sell their houses.

Having said that, Cleveland Heights is an absolutely wonderful place. And I highly recommend it for folks without chilluns. It's one of the most diverse, and well-educated communities in Cleveland. Coventry has wonderful shops and restaurants. The streets are tree-lined and pleasant and it is convenient to University Circle and Case. It was known as the city of trees when I was growing up. And it is a safe community. The police have little to do and spend a lot of the time enforcing leash laws.
posted by bananafish at 1:27 PM on March 14, 2007

I grew up in Shaker Heights and I know Cleveland Heights well. My family still lives in Pepper Pike, an eastern suburb. There is a LOT of inventory in just about every suburb and neighborhood and not a lot of movement.

I'd like to add a couple of points building on what everyone else has said.

There are some streets and neighborhoods in Cleveland Heights that have huge beautiful mansions and there are some streets I might not feel really safe on. So, "Cleveland Heights" can mean a lot of different things depending on what street you're looking at.

As for Shaker Heights, when you resell a house, city inspectors will make sure there are no code violations that you're passing on to the buyers. It's nice for you when you're the buyer but when you're the seller, you might be shocked at what you've got to put in before you can sell.

As others have suggested, a rental might be easier in the long run. I especially like the area of Little Italy which is very close to Case.
posted by Kangaroo at 1:34 PM on March 14, 2007

I want to second Kangaroo, that Cleveland Heights, while generally great, has some bad areas I would never live in.

I grew up in Maple Heights, not too far away from Cleveland Heights and know the area well. Despite my first sentence, if I were to move back to Cleveland I would either move there or Lakewood. As I sit in my overpriced DC apartment talking to my broker about buying an even more overpriced apartment in NY, I think about what a great house I could get in Cleveland for half the price.
posted by Falconetti at 7:05 PM on March 14, 2007

Thanks all for the expert advice. Very helpful for someone who doesn't know the area. I think we'll rent.
posted by Grundlebug at 7:08 AM on March 15, 2007