Cleveland, OH: 1.6% Return on Investment (2011)
Cleveland is one of the markets that has been hit especially hard by the economic downturn, because of its dependence on manufacturing and the automotive industry. With the foreclosure listings currently exceeding the listings of normal homes for sale, values in Cleveland are expected to be under pressure for quite some time into the future. Currently, approximately 60% of listings are from foreclosures[1].
Cleveland represents a challenging market for investors, since the market rents are still a bit low relative to market values. The fundamental problem faced by investors in Cleveland is one where the pool of commercial activity and rental tenants are likely to contract throughout the near future. As these events unfold, they will result in continued difficulty for investors as they find it more and more challenging to find qualified tenants. With high unemployment, crime rates at double the national average
_ftn2″>[2], per-capita income far below the national average, and a declining population, Cleveland is facing many difficulties that will not be solved quickly. The prevailing economics of the city point toward high vacancy for income property investors and downward pressure on prices as more people leave the city.
The Cleveland market is currently priced below the levels experienced at the end of 2000. This is compounded by the fact that the city is facing a very long and slow road to recovery. In order for the city to rebound, it will need to adjust many of its economic fundamentals such as regulations, and rates of taxation to attract new commercial entities. Values in the market are still in decline, generating negative rates of leveraged appreciation for investors. In 2011, values are expected to bottom with a regression toward modest appreciation relative to a drastically reduced value basis. Income property investors should steer clear of Cleveland.