Will the rest of East Nashville rise for real?

Rising rates are pushing the hot market beyond Five Points area

This is an interesting time to live in East Nashville, as the nonmainstream area with its fiercely proud citizenry continues to cultivate many of the city’s most distinctive independent restaurants, bars, cafes and retailers.  

Not surprisingly, the popular urban enclave is a good place to be, too, if one is interested in capitalizing on a strong residential real estate market.

The key to enjoying a robust return on investing in single-family homes on the east side, however, seemingly involves buying as geographically close as possible to Five Points — the bar and restaurant epicenter that is surrounded by multiple historic neighborhoods.

Statistics compiled by the Greater Nashville Association of Realtors show that homes in the 372026 ZIP code — anchored by Five Points and including Eastwood Neighbors, Lockeland Springs, Historic Edgefield, Greenwood Neighbors, Rosebank, Rolling Acres, Maxwell Heights and Eastland Park — sold for a median average of about $76,500 in 1998 and about $219,000 as of June 2013. That is an almost-staggering increase of 186 percent and actually puts 37206 above the median home price for the Nashville MSA as a whole.

In contrast, GNAR stats show homes in the entirety of what the association classifies as East Nashville — which includes the eight above-mentioned neighborhoods and 13 others — sold for an average of about $76,000 in 1998 and about $158,500 as of June 2013. Though a strong hike of 108 percent, the value jump pales in comparison to that of the average increase for the homes located within the heart of the historic east side.

Clearly, it is worth noting the most dramatic increases in home values from year to year have been seen in the east side’s oldest and best recognized districts, particularly the heavy-hitting trio of East End, Historic Edgefield and Lockeland Springs.

But it is also interesting to see that some transitional neighborhoods — like Cleveland Park, which is located fairly near Five Points — have gained popularity since the Great Recession subsided but have not necessarily  enjoyed corresponding dramatic home value increases. This could be, in part, because turnover might modest considering many of the homes in these neighborhoods are rental properties and, as such, don’t change ownership hands with the same frequency as do those in the more stable and desirable neighborhoods. If so, that could skew the numbers. For example, the median average price for a single-family home sold in Cleveland Park in 2012 was $130,000. As of this past June, that figure was the same.

Indeed, an interesting dynamic is playing out, one that cannot easily be explained and that those who follow residential real estate on the east side continue to monitor closely.

Summer and Doug Wirth know this well.

When then-newlyweds relocated from Chicago to Nashville in May 2009, they were drawn to East Nashville’s Inglewood neighborhood for several reasons.

“We were looking for a neighborhood where we could afford a decent-sized home with character that was a reasonable drive to work,” explains Summer Wirth, who moved to Nashville to complete a residency at Vanderbilt University Medical Center. “We were hoping to be somewhere that was in proximity to restaurant options and a park system, if possible. East Nashville had all of that, and Inglewood was the most affordable option with everything that we were looking for.”

The Wirths purchased their first home, a three-bedroom two-bathroom brick ranch built in 1950. At just under 1,400 square feet, the house was the perfect starter home for the young couple and was walking distance to Riverside Village, a quirky commercial mini-district located at the intersection of Riverside Drive and McGavock Pike and highlighted by multiple restaurants and a coffee shop.

Although the house was newly renovated when they purchased it, the Wirths did a substantial amount of work on their home, including adding elaborate crown molding and wainscoting throughout the interior and custom planters in the backyard. When Summer graduated from residency this past June, the couple put their house on the market, hoping to sell quickly while they looked for a new house in the Chicago suburbs.

“Establishing a price was difficult,” Wirth admits. “We used our prior purchasing price and added on the estimated cost of improvements. We set a price that we thought would give us some room to negotiate if we needed to. We had the house appraised a few weeks before listing it, but appraisals in East Nashville have been really unpredictable lately. Home values have been increasing 2 percent monthly. There really aren't reasonable comps for the appraisers to use.”

Despite their hesitation regarding the appraisal, the Wirths set their sale price above the appraisal amount — and approximately $28,000 above what they paid in 2009 — but still in a competitive range to the Inglewood median price of $200,788, according to trulia.com. Within 24 hours, they had nine offers, and only one offer was below their asking price. They accepted an offer that was 5 percent over their asking price, and from a buyer who was willing to take the house in “as-is” condition, which would avoid any surprises in the upcoming inspection that might affect the deal.

Lest you think this is a real estate urban legend, the hype about East Nashville — loosely defined as bordered by the Cumberland River on the east and south, Interstate 65 on the west and Briley Parkway on the north — doesn’t stop with the restaurants or the bands or the multitude of articles being written about the neighborhood in publications ranging from The New York Times to The Guardian.

GNAR reports year-to-date closings in Nashville were up nearly 24 percent at mid-year 2013 compared to mid-year 2012 reports. And a lot of this activity is happening on the east of the Cumberland River.

According to Karen Hoff, broker/agent and co-owner at Historic & Distinctive Homes, the neighborhoods that surround Five Points are the true hot commodity.

“The historic district has had this big growth over the last 20 years,” Hoff says. “During the recession, it slowed down a little bit, but the outlying areas around it — like Cleveland Park, McFerrin Park, Inglewood South, East Hill, Greenwood Neighbors — some of those cluster areas started growing by leaps and bounds. As of the first of this year, the market’s gone gangbusters again; the historic district has had this meteoric rise all over again as if it never had a recession. Prices are going out the roof.”

Hoff, a 25-year real estate veteran who has actively worked the East Nashville market for nearly her entire career, says that since inventory is still low, buyers are looking at areas that they might not have previously considered. Attracted by low interests rates that have been steadily climbing since May  and fearful of future volatility in the market, people want to buy, and they want to buy now.

“People don’t know what interest rates are going to do in the next couple of years; if rates go up, you won’t be able to buy as much house,” Hoff says. “It’s created an urgency factor in the outlying districts. Cleveland Park and McFerrin Park are going like gangbusters because you can buy fully remodeled houses in the $200,000s [and] beautiful Victorian cottages in the mid-$200,000s.”

Charlie Staton says that, when searching for a home to purchase, he chose East Nashville for its close-knit community, unique restaurants and nightlife.

“Initially, I focused my search in Lockeland Springs, but I quickly became frustrated because of the lower inventory and higher cost of homes that were on the market in that area,” Staton recalls. “I had a fantastic real estate agent that encouraged me to look into some of the areas surrounding the historic district, but I was hesitant at first. I had never heard of neighborhoods like McFerrin and Cleveland Park, but when I saw my house, it was love at first sight, and my love for Cleveland Park followed soon thereafter.” 

Staton bought his home in August 2011, and says that since then, the transformation in the area has been remarkable.

“It's exciting to be in a neighborhood that is constantly evolving with new construction and renovations, and [that] is also rich with cultural and racial diversity,” Staton says. “The new development at the intersection of Cleveland Street and Lischey Avenue has really brought life to that corner, and the ongoing renovation of KIPP Academy promises to add even more character to my neighborhood.”

Natalie Edwards, a fan of East Nashville’s restaurants, shops and historic homes, wanted to buy in an affordable, transitional neighborhood with charm and character.  Like Staton, the homes in the historic district were out of her price range, so she turned to the outlying neighborhoods. She purchased her first house, a three-bedroom, one-bathroom house just under 1,100 square feet, in Cleveland Park in January 2009. Though she would later move to Inglewood, she retained ownership of the Cleveland Park house, renting it out, and later purchased an additional rental property in adjacent McFerrin Park.

“I bought over there because I felt it was a great investment, and I was priced out of the other more popular East Nashville neighborhoods,” Edwards says. “I won't lie. It was pretty rough when my then-boyfriend —now husband — and I moved in. We even had a drug house a couple doors down.”

Edwards says that since early 2009, she has seen an increase in renovations in the area, positively affecting everyone’s property values as the aesthetics of the neighborhood improve. True, as Edwards points out, each street in each neighborhood can have rough spots that drag down the median home value, such as the aforementioned “drug house.” But through the efforts of the Metro Police Department’s East Nashville Precinct and active neighborhood associations keeping an eye on the streets, crime has steadily decreased in the area; in 2012, crime in East Nashville was down 35 percent since 2004.

“Now, crime is down and we've seen many nice young professional couples move in,” Edwards says. “I'd love to see the neighborhood continue on the path that it's on. I think it's headed in a great direction.”

Edwards says that she feels like she made a good investment on her properties and that she and her husband are thinking of moving back to Cleveland Park.

“It’s changed a ton even in the year and a half that we left,” she says. “I really believe in the Cleveland and McFerrin neighborhoods — so much potential, great stock of historic homes needing some love, and so close to downtown. If I had unlimited funds, I’d own a lot more real estate over there.”