For first time in five years, real estate hot spot experiences a slowdown

By CHAS SISK
Staff Writer

When he looks down Meridian Avenue, Scott Bonner sees beyond the neglect to the signs of promise: Craftsman bungalows with their attractive trapezoidal columns, tree-lined streets and sidewalks, a short commute to downtown Nashville and Midtown.

Two years ago, Bonner had never heard of this neighborhood, Cleveland Park. Now it’s where he makes his living, piece by piece turning abandoned houses on a working-class street into something a young professional would want to start a family in.

“I was worried about it, but so far, they’ve sold quickly,” said Bonner, who has renovated and sold three homes, the most recent to a young family.

That any of them would even consider buying into this until-recently impoverished area on the edges of East Nashville shows just how much has changed east of the Cumberland River in the past few years.

Throughout much of what is considered the core of East Nashville, the rehabilitation market seems to have hit its peak. Gone are the cheap, teetering Victorians that could be bought for less than $100,000 and resold after renovations for $100,000 more.

Instead, many of the investors, bargain hunters and young professionals who remade East Nashville in the late 1990s are moving west. They are buying up the neglected cottages along avenues such as Lischey, Pennock and Treutlan — streets that even many longtime Nashville residents may not have heard of — leading many to believe this is the city’s next growth market.

Their enthusiasm has led them to cross that great frontier, Gallatin Pike, which, for the better part of a decade, has demarked East Nashville’s fashionable neighborhoods.

The buzz of circular saws and bang of hammers are becoming almost as common in the triangle created by Trinity Lane, Gallatin Pike and Dickerson Pike — neighborhoods such as Maxwell Heights, McFerrin Park and Cleveland Park — as in Lockeland Springs or Edgefield.

Meanwhile, a little bit of the wind seems to have come out of the sails of East Nashville’s booming market. For the first time in five years, the area is experiencing a slowdown.

With rehabbers routinely asking for more than $300,000 for their homes, many first-time home buyers are passing up the market, real estate agents, residents and investors say.

“It’s gotten so expensive that it’s discouraging people that can’t afford to buy in, people that are making $30,000 or $40,000 and can’t pull the numbers,” said Eric Quiram, chairman of the housing committee of Rediscover East!, an umbrella group for East Nashville neighborhood associations.

Renovators also say it is getting harder to find good properties in East Nashville. Five years ago, Cindy Evans helped her boyfriend, a builder, buy a house on Gartland for $50,000. Recently, they paid twice as much for a smaller house that needs more work and sits on a far less fashionable street.

“The houses get worse and worse, and the prices go up,” she said.

Instead of attracting people who would buy a home and gradually rebuild it while living inside, the “urban pioneers” for which East Nashville is famous, the market now seems to be geared at upscale professionals who want to move into a finished product, observers say.

Investment groups are buying homes and renovating them on speculation. Many are pouring more money into the homes, with flourishes such as granite countertops and custom cabinetry.

“Home prices have increased and the values have gotten so that there’s more money you can spend on it,” said Lynn Taylor, owner of the East Nashville residential design firm Taylor Made Plans. “If you bought it for two-hundred thousand and it’s valued at five-hundred thousand, there’s more you can do.”

Evidence of East Nashville’s new clientele can be seen in some of the prices. This year, at least two homes have sold for more than $500,000, a first for the neighborhood say realty agents. Another is listed at $738,500, and a fourth, which can be used for an in-home business, at $1.5 million

But the higher prices have made some homes harder to sell. Price reductions have become commonplace, especially for homes in which renovators have not chosen top-quality materials, say agents.

“If there’s a market that’s booming in value, a lot of people are going to put their house on the market with a projection of where they think the market is going to go,” said Karen Hoff, an agent with Historic & Distinctive Homes who has worked in East Nashville for two decades. “It takes them a couple of months to figure out that maybe their house is not worth that.”

‘A fake bubble’

Meanwhile, people such as Chris Weigel are jumping at the chance to buy in northeast Nashville. Weigel, 28, an account executive, and his wife have been house hunting since moving to East Nashville two years ago. In the end, they agreed to buy Bonner’s Craftsman bungalow on Meridian for $180,000, even though it is months from completion.

“It’s a real estate bubble, like a fake bubble,” he said of the housing market in the traditional East Nashville neighborhoods. “They’re trying to push the envelope so much that they’re driving up prices.”

The deal is contingent on Bonner’s completing the renovations to the Weigels’ satisfaction. Last week, Bonner and another worker were rebuilding the roof of the house’s wrap-around front porch. Inside, he had already ripped down the house’s acoustic-tile drop ceilings, pulled up its nasty shag carpeting and rebuilt a fireplace that had been covered in ’70s-style tile.

The situation with the Weigels is a reversal of roles for Bonner. Eleven years ago, he purchased a home undergoing renovation in a neighborhood near Belmont University. Since then, the value of Bonner’s house has more than tripled. That equity has financed his move into construction.

Bonner bought the house on Meridian for $66,100 in September, beating out a dozen other bidders. (He declined to say how much he will spend on renovations.) With each house he has bought and renovated, he has had to pay more. But each time, the house has sold within a week of being listed.

That has allayed the fears he had when he first went into the Cleveland Park market.

“I was worried about whether I was going to find a buyer,” he said. “I would get people who would stop and say, ‘How much are you going to rent it for?’ There are a lot of people here that don’t even consider buying.”

Buyers in northeast Nashville face risks as well, crime chief among them. Bonner said that, despite a notice from the sheriff stating there was nothing of value inside the house on Meridian when he bought it, thieves had stolen all of the copper pipes when he took possession.

On top of that is the concern among some buyers that they are gentrifying a new area.

“I feel conflicted,” said Heather Talley, a Vanderbilt graduate student who bought a century-old Victorian in the Cleveland Park neighborhood a little more than a year ago. “I do know that by being another white face on this block, I make other white people who do have more money more willing to buy in this neighborhood.”

But for a certain kind of person — someone with an inclination toward urban living and little money — these streets may soon be the place to live.

“Value has a lot to do with why we’re moving into that neighborhood,” Weigel said. “But that said, we could have easily moved to Mt. Juliet and Spring Hill and all this kind of business for a lot cheaper.” •

By Richard Courtney
October 20, 2006

Rick French, one of the principals with French, Christianson, Patterson and Associates, recently attended a conference of Christie’s affiliates in Beverly Hills, Calif. There he discussed market conditions around the world and learned mind-boggling information.

One of the most interesting stories emanates from Russia where a two-bedroom, one-bath condominium with a small kitchen, and the only light fixture being a light bulb dangling on an exposed wire from the ceiling, would sell for the price of three suitcases. For those unfamiliar with the currency exchange in Russia, French explained that a suitcase is $2 million cash in United States currency. So, a 750-square-foot Russian condominium is $6 million in Moscow, a mere $8,000 per square foot.

These prices are not found exclusively in Russia. For example, in the south of France, warehouse-type condos sell for over $50 million according to French’s colleagues. That’s $50 million for a condo. These prices are significant inasmuch as people in Nashville often think that prices will fall at some point and that there is a ceiling on real estate.

In the early 1990s, when prices in Belle Meade achieved sales of more than $100 per square foot, many thought Armageddon was around the corner. Now many homes in Sylvan Park sell for more than $200 per square foot. In fact, in order to find homes under $100 per square foot, buyers must roam to Buena Vista, a neighborhood north of downtown and near Metro Center.

French also spoke with U.S. real estate agents who are experiencing slow, or horrid, market conditions. He learned that Miami has a five-year supply of homes priced at above $3 million. He added that in Miami, there are 4,000 properties listed for over $1 million.

While those numbers reek of market desperation, the Floridians informed French that more than 1,000 people a day relocate to south Florida from Key Biscayne to Fort Lauderdale. In Las Vegas where the market is currently off about 40 percent, there are 400 people each day moving into the area. Consequently, large numbers of investors are beginning to pour millions, if not billions, of dollars into these markets. It will be interesting to monitor these markets.

Here in Nashville, only 26 homes have sold for more than a suitcase with 240 selling for better than a half a suitcase. While such numbers pale in comparison to those of Russia, this year’s sales of more than a half suitcase will surpass last year’s record by 50 percent. Pack your bags.