Economic downturn? Try economic opportunity in the Heights
In the 1980s, homebuyers saw real estate as a precious commodity. Double-digit interest rates were the norm and the prospect of getting into a home was a lifelong proposition. Achieving the American dream was not easy.
Something changed in the mid-1990s: incomes spiked, interest rates tumbled, and the perception of real estate changed. By the early 2000s we had become a country of quick flippers. Loads of average people tried to win big by buying property at low prices, sinking small amounts of capital into improvements, and then reselling the house for a big gain. It was a win-win for everybody. Communities collected more property tax income while flippers modeled the American dream quickly by moving into bigger and better homes.
Unfortunately, a simple concept was lost in this transformation: For the average person real estate was never supposed to be a quick-flip financial windfall. The artificial inflation of the 1990s sparked a real estate revolution that catalyzed a financing boom and made home ownership a much more transient endeavor. People normally satisfied to find the perfect starter home and live in it for 10 years before moving began to skip the starter home and head straight for the big house. Mortgage lending skyrocketed and many people incurred substantial debt obligations wrapped up in complex financing schemes. Adjustable rates, balloon payments and no-interest financing permeated the landscape, heavily contributing to our current situation.
Today some people say we are in an economic downturn or a recession. But are we? Much debate has taken place on this topic over the past eight months, intensified by the presidential election. Gas and food costs, for example, have certainly increased, but a significant argument can be made that these everyday commodities were heading for an inevitable increase regardless of current economic factors. And, despite those negative pressures, the economy still grew last quarter and the municipal bond industry witnessed the two largest issuance volume months in U.S. history this summer.
So are we really in a downturn or is something else happening? Perhaps this is all just a “correction” that will bring our real estate appetite to a more appropriate level. While the media focus largely on economic problems related to sub-prime mortgage lending, many industries are making significant economic progress. Take the home repair, rehabilitation, landscaping and renovation industries, for instance. Here in the Heights home improvement is booming and the trend does not look to be slowing down anytime soon.
Erik Fridlund, co-owner of Reserve Restoration, says the company has “more business then they know what to do with," and that this summer has been very successful.” This news comes from a company that specializes in extensive (and expensive) projects that encompass a comprehensive approach to improving older homes, including painting, window glazing, and extensive repair and restoration elements. Reserve Restoration has been inundated with project requests this year and sees the current real estate market as an opportunity for homeowners to reinvest in their properties.
A look around Cleveland Heights reveals more of this economic “correction” taking place with hundreds of homes currently under some type of serious improvement. Landscapers and painting companies are doing a brisk business and glass block window installers are on a 2-3 week backlog for new installations. In the neighborhood bordered by Lee Road, Cedar Road, Coventry Road and Fairmount Boulevard alone, dozens of houses are witnessing significant rehabilitation from painting, architectural repair, and landscaping to window, door, and roofing projects. That's a recession?
Heights residents Mike and Michelle Riechman made the decision to replace all of the windows in their home, a costly expense and a decision that flies in the face of concerns over property values. Said Michelle, “we realize with today’s real-estate realities that we will be making a longer-term commitment to our home in Cleveland Heights than we had perhaps originally expected and that we might as well get the most enjoyment and affordability out of our home now. With the potential for an increase in heating costs it only makes sense for us to invest in keeping our house efficient and competitive in the real estate market.”
So where does this all leave us? As a community we will always face challenges related to the cost and availability of natural resources and commodities. America has struggled through these ebbs and flows for years. Today, homeowners are looking at longer investment horizons and more significant commitments to their homes and neighborhoods, positive side-effects that should be embraced in our community.
A large investment is taking place right here in our backyard, building a stronger and more substantial housing stock for the long-term economic viability of the Heights, certainly not a bad outcome.Toby Rittner lives on Coleridge Road and is an active community volunteer.