Sunday, 02/27/05
By KEITH RUSSELL
Staff Writer

Take a glance at the escalating property values in some Nashville neighborhoods, and you might be excused for thinking the price of a home in Middle Tennessee is rising as fast as any California bungalow.

But while some properties in the Nashville area’s hottest housing spots are seeing values double in just a few years, generating sizable windfalls for their owners, overall home prices have been rising at a more measured pace. In fact, the 7.2% rise from a year earlier in the price of a median home sold in the Midstate during the past three months of 2004 not only trailed the average growth rate in the South but also in the nation.

Yet even those numbers don’t completely capture the more complex story of pricing trends in the Midstate’s fast-growing housing market, which set records last year for both the number of homes sold and built.

In some pockets of town, stories of people such as Jessica Kimbrough abound. When Kimbrough and her husband put their cozy Hillsboro Village bungalow on the market this month with an asking price of roughly $300,000 — more than twice the $128,000 it sold for eight years ago — they wondered if they might be getting greedy.

”We thought we were pushing the envelope a little bit,” said Kimbrough, a self-employed accountant whose husband, Will Kimbrough, is a musician and recording artist. ”I said let’s go high, and if nobody blinks we’ll come down.”

They needn’t have worried. The Kimbroughs had their 1,500-square-foot house on Bernard Avenue under contract in a single day, their asking price met. Tales of fast sales and fast-rising prices can be heard from plenty of other homeowners cashing in on the lasting desirability of neighborhoods such as Belle Meade, Green Hills and Franklin or the newfound popularity of areas such as 12th South and east Nashville.

To many other owners, however, such reports of surging home values must sound like a fantasy world. Sellers in areas such as southeast Davidson County must fight against a constant tide of new-home construction and other challenges to see even modest appreciation in their home values.

Consider one client of Realtor Terry DeSelms, who have had their three-bedroom home in Antioch’s Hickory Highlands subdivision on the market for more than two months. No buyer has been found despite an asking price that is barely 2% more than the $134,600 they paid for the property when it was brand-new five years ago.

”I sell more homes than anybody, and I just don’t see many 7% (annual) increases,” said DeSelms, with Re/Max Elite.

No bubble in Nashville

Since 1999, the median price of a single-family home sold in the Nashville area’s five largest counties has risen by 17.6%. It rose 4.4% last year, according to Market Opportunity Research Enterprises (MORE), a Rocky Mount, N.C., research firm. The median price of $154,580 means that half the homes in the market sold for more than that last year, and half sold for less.

In the fourth quarter of 2004, 62 metropolitan areas saw double-digit percentage increases in the median price of existing homes sold compared to the previous year, according to the National Association of Realtors. Las Vegas topped the list of metro areas with a 47.3% surge in prices, followed by California’s Riverside-San Bernardino and Florida’s Palm Beach-Boca Raton-Delray Beach areas, which saw increases of 34.7% and 34%, respectively.

Nashville wasn’t one of the big gainers. The 7.2% rise in its median home price during the quarter trailed both an 8% increase experienced in the South and a national 8.8% rise.

”Some of the resort and retirement areas are seeing significant appreciation,” said Bernard Helm, MORE’s president. ”These are the real estate ‘bubbles’ that everyone talks about. Nashville is one of the more traditional cities where that is just not happening. I don’t see a bubble in Nashville.”

Home values will get the attention of property owners in Nashville next month, when Metro government begins mailing out new property tax assessments. While the four-year assessments themselves are designed not to dramatically raise taxes on owners whose property values rise, they have coincided with property tax rate hikes the past three times they occurred, in 1993, 1997 and 2001. Mayor Bill Purcell hasn’t yet tipped his hand, but many expect he will propose another increase this year.

Besides affecting taxpayers, the modest level of appreciation has also helped keep living costs in Nashville more affordable and attractive both to out-of-town corporations and people looking to relocate from higher-priced locales.

”Compared to L.A. and Southern California, the prices in Nashville are quite reasonable,” said Eric Gorfain, 35, a musician in Los Angeles who is looking into buying a home in Nashville, where he travels for work on occasion.

$529,000, no dishwasher

MORE’s data do not provide a breakdown of prices by neighborhood or ZIP code. The best available neighborhood-level look at home prices over the years may be one by Richard Exton, a local real estate appraiser and president of the Greater Nashville Association of Realtors.

Exton last week completed an analysis of home values in eight Davidson County neighborhoods as well as Brentwood and Franklin in Williamson County. He said his work should be used as a guide rather than a definitive study, noting that prices for an individual home can be higher or lower depending on several factors, such as its exact location or buyer preferences.

Those caveats aside, Exton’s analysis showed that prices rose in every neighborhood during 2004, though at markedly different rates.

Prices rose the most in Belle Meade (12%), Brentwood (7%), Green Hills and West Meade (both 6%). In these places, as well as other established hot spots such as Hillsboro Village, real estate agents say it’s increasingly common to see sellers such as the Kimbroughs find buyers less than a week after putting their house on the market.

”It wasn’t even officially on the market,” Jessica Kimbrough said. ”We didn’t have our sign up in the yard.”

Exton speculated that the state of the economy could explain why such wealthier neighborhoods are seeing prices rise more quickly.

”The people most likely to benefit from an improving economy, especially a jobless recovery like we saw in 2004, are the people who can afford to buy in Belle Meade,” Exton said. ”These are the business owners and people who have significant personal wealth.”

They also have more money to spend, he said, thanks to lower tax rates and, for the past two years at least, a rising stock market.

In addition, Exton and others note that a lack of inventory is another key to rapid appreciation in these sought-after neighborhoods. The overall number of homes available in Middle Tennessee is at the lowest level in several years, but inventory is especially acute in places such as Green Hills and Belle Meade where there is little room to build new housing. The short supply has developers regularly paying top dollar for older homes with the intent of tearing them down to put up even higher-priced properties.

In the Oak Hill neighborhood, for example, some real estate agents were surprised to see a four-decade-old ranch home at 1011 Gateway Lane go on the market last week for $529,000.

”The kitchen didn’t even have a dishwasher,” noted real estate broker Stephanie Tipton. ”But I’m sure they’re going to have plenty of people lining up” to buy it as a teardown project.

Line up they did. Diane Stone, who is helping sell the home for her sister, said close to 40 people braved rainy weather to attend an open house last weekend. Two buyers have already lined up with offers. She said she didn’t ask what their plans for the two-acre property might be.

”It was phenomenal,” Stone said of the interest in the home. ”If five people had showed up we would have been happy.”

Sellers in the catbird seat

As million-dollar homes replace older ranches, it can increasingly price many home buyers out of markets such as Green Hills and Belle Meade, said Richard Courtney, a Realtor with Fridrich & Clark Realty.

”If you’re a home buyer in Green Hills, $350,000 is not an option to buy a real house,” Courtney explained.

That has sent buyers into other neighborhoods, increasing demand and raising prices. In 2002, a prospective homeowner could buy a brand-new unit in Sylvan Park’s Normandy Place condominiums for $131,000. Three years later, recent sales in the complex have topped $200,000.

Similar anecdotes of rapidly rising home values can be heard in the 12th South neighborhood between Lipscomb and Belmont universities and in east Nashville. Recently, Tipton recalled seeing nine properties go on the market in east Nashville; six were under contract in fewer than five days.

”As a seller, you’re in the catbird seat. As a buyer, you’re in a cutthroat situation,” Tipton said of hot areas such as east Nashville. ”I’m telling my clients they need to define what they want, have their financing ready on the front end and walk in ready to buy. There’s no sleeping on it.”

Competing with builders

Home sellers in other parts of Middle Tennessee aren’t nearly as fortunate. According to Exton’s analysis, home values in Donelson rose just 1% last year. Antioch saw a 2% increase in 2004, but that followed a 1% decline in 2003 and 5% drop in 2002.

Several real estate observers said homeowners in these areas are victims of the rapid new-home construction around them. Since 2001, 6,964 new houses have been started in southeast Davidson County, 2,560 more than all the rest of the county. Plenty of available and relatively cheap land has allowed developers to build scores of new subdivisions, many of them marketed to first-time home buyers.

”If you take a large subdivision where a developer is building 200 or 300 new homes, the selling price of resale homes there will be held down artificially until the builder stops building new homes,” said MORE’s Helm. ”As long as a resale has to compete with a builder, the builder is going to win.”

In practice, real estate agent DeSelms said an existing home must be priced at least $5,000 to $10,000 below the price of new homes in the area. But that can be easier said than done, especially if an owner hasn’t been in the house for very long.

DeSelms said he worries most about owners who may find it impossible to price their homes high enough to pay off their mortgage, let alone commissions to their real estate agent. Often, this can happen if a buyer adds closing costs, down payments and other expenses to the mortgage.

Perhaps not coincidentally, Antioch’s 37013 ZIP code saw the second-highest number of foreclosures in Middle Tennessee last year.

”It gets people into houses,” DeSelms noted, ”but it makes it almost impossible for them to get out, unless they stay in it for at least five years.”

Even then, there are no guarantees. DeSelms’ clients in Hickory Highlands nearly had a deal after the house was on the market about 45 days. But the sale fell through after the buyer failed to qualify for a mortgage.

”It can be tough, really, really tough,” DeSelms said. ”It happens, but it takes a little more time.”

By NANCY DEVILLE

EAST NASHVILLE — A new loft development is headed to the 900 block of east Nashville’s Woodland Street.

East End Lofts, which will be built near Five Points, will be a four-story building that will include 42 units with pricing starting at $139,900.

The residences will range from 736 to 1,110 square feet and include one- and two-bedrooms with one or two baths.

The project is a joint venture between developer Fred Williams and the Bristol Development Group.

”This is a totally different project than what was planned for the site before,” said Mark Deutschmann of Village Real Estate Services, who is handling the sales and marketing.

”This area is one of the prime gateway locations to east Nashville. It’s a redeveloping neighborhood commercial district. This brings residential to a zone that hasn’t seen that before. This is a likely site because it’s between downtown and Five Points and is just a natural location.

The lofts will feature such amenities as stainless steel appliances and sink and custom ebony cabinetry.

Two of the units will feature private rooftops, while all the lofts will have a terrace.

There are eight to 10 floor plans from which to choose. There also will be a gated lot for resident parking.

Deutschmann says the location is ideal and is close to schools, interstates and stores.

”It’s located pretty close to the Turnip Truck and the many restaurants in Five Points,” he said.

”The library is around the corner along with other services that are emerging in east Nashville. It sure is accessible to downtown, and Woodland Street is on a bus line.”

Jeff Ockerman, president of the East Area Business Council, said the project is reinforcing continued development, which began with the City View Lofts project also on Woodland.

”I think it’s an encouraging project because it shows the recognized value of condominium development in east Nashville,” he said.

”The project, as the design is proposed, is a real contemporary interpretation of the architectural design for the area. This is a type of design we haven’t seen before in east Nashville, but one that I think will be received with a lot of interest.”

Deutschmann said the project would be a good niche for single or urban professionals looking to relocate to east Nashville for a reasonable cost.

”This is an affordable opportunity to live in this location,” he said. ”It does offer a really good first-time buyer formula.

”From our experience selling some of the other projects downtown, there is quite a demand in the marketplace for a product under $200,000.”

Jennifer Kocak, owner of Urban Décor, a modern upscale furniture store at 937 Woodland St., said the East End Lofts would be an asset to the area.

”It’s going to be a way to improve and enhance the neighborhood and to indirectly increase security,” she said. ”There will be more middle- class traffic in the neighborhood, which is a good thing all the way around.”

Kocak said her store offers merchandise that will be a perfect fit for loft owners.

”Lofts run a little bit smaller to your average home,” she said. ”A lot of the furniture we offer is scaled to loft living.

”Some of our pieces are not as large but yet are just as functional. We do have some pieces that are multifunctional that will go from a coffee table to a full dining table in case someone doesn’t have a full dining room but wants to entertain in a formal way.”

Groundbreaking is expected to be in early summer and the construction process is anticipated to last about a year, Deutschmann said.

By William Williams, wwilliams@nashvillecitypaper.com
March 04, 2005

Rehabbing of one of the city’s few remaining 19th century industrial buildings, a brick structure at 621 21st Ave. N., is under way, and the structure is ready for build-out.

Nashville businessman Charles Jones bought the North Nashville structure from Saber Industries, Inc., for $475,000 last August. He said, a $50,000 cleaning and sandblasting effort was finished last month.

Jones is now marketing for redevelopment the historic structure, located just north of Charlotte Avenue and the city’s Midtown medical district.

He envisions loft apartments/condominiums and/or office space and has already had the building rezoned to accommodate mixed use.

“It is cleaned and ready for build-out,” Jones said. “We’re ready to start showing it to prospective tenants.”

Jones said he has invested about $20 per square foot in the building and will ask $750,000 for the building and its approximately 1.4 acres.

“Or for a qualified client, we would do the build-out,” he said.

The building is on a CSX rail line and at one time featured an extension, likely used as a warehouse for cotton or tobacco, Jones said.

Jones said the building has solid masonry walls, heart-of-pine floors/beams, arched windows and a basement.

Tim Walker, historic zoning coordinator of the Metro Historical Commission (MHC), described 621 as a “great brick warehouse.”

“The building is an important piece of our history,” Walker said, adding the MHC had feared the building might eventually be demolished. “Buildings of this type talk to the importance of the railroads as a form of transportation,” Walker added.

In November, Jones bought for $300,000 a two-building, 1960s-era apartment complex and is spending about $250,000 to improve the property. He intends to lease residential space in that building — about one block from his warehouse — while giving tenants an opportunity to build equity toward possible unit ownership.

Metro Councilman Edward Whitmore, in whose District 21 the property sits, said Jones’ projects can serve both the bustling medical district and residents living north of Charlotte Avenue.

“The area has been stagnant for some years,” Whitmore said. “I am very pleased to have Mr. Jones as a developer to come into the area and improve it.”

Jones has experience rehabbing large pre-World War II-built structures. For example, he oversaw conversion of the former St. Bernard Convent building, which is now called Convent Place and home to Jones’ office.

In addition, he owns portions of the former Werthan Manufacturing Co. bag building, which he is selling in stages to The Lofts at Werthan Mills LLC. The Werthan complex, located in Germantown, continues to be re-fashioned as loft condos.