For Real Estate Investors, the Slow-but-steady Markets (Like Cleveland) can win the race

Article by Scott Suttell, Managing Editor of Crain's Cleveland Business.

Real estate investors should pay close attention to Cleveland.

So argues Ingo Winzer, president of Local Market Monitor, a firm that produces forecasts of home prices, rents and investment risks in markets nationwide, in this piece for Forbes.com that identifies the best markets for real estate investments in 2019.

Here's how he begins:

This coming year, most real estate investors will want to stay away from the cities with soaring prices, where they're more likely to end up holding the bag than to strike it rich.

You can never know when a real estate bubble will burst – I happen to think it won't happen in 2019 – but in places like San Francisco, Seattle, Miami and Denver, caution is now the order of the day. If you own property in these spots and plan to sell, don't wait until the market has peaked. And if you're looking for a good place to put your money, you should consider instead the 20 markets we're listing here.

At No. 5 on that list of 20 is Cleveland. The other Ohio market on the list is Cincinnati, at No. 20.

Here's some of his rationale for tipping real estate investors to look at Cleveland:

• "These 20 markets have several good things going for them. First, the local economy is doing well. Jobs grew at or above the national rate of 1.5% in the past year. In places like Cleveland (who would have thought?), Silver Spring and Fort Lauderdale, the rate of growth is even a good deal higher than just six months ago."

• "The low home prices in Cleveland, Indianapolis, Memphis, Kansas City and Cincinnati encourage you to buy large single-family homes and split them into several rental units. In Silver Spring, Boston, San Diego and Washington, on the other hand, the high prices make investments in apartments a better alternative."

• "In general, markets with high growth are better bets than those with lower growth, but a stable growth rate is just as important in the long run. And there are special vulnerabilities to consider. Orlando depends on tourism, Charlotte on banking, Fort Lauderdale on Miami, Fort Worth on Dallas, Memphis on FedEx, Silver Spring and Washington on government jobs and government contractors. Cleveland and Cincinnati still have a big manufacturing sector."

• "Overlooked spots like Cleveland, Philadelphia and Kansas City appeal to me the most because you're more likely to find properties in very attractive locations, which in the end is what counts for a successful investment."

WARNING SIGNS?
Loretta Mester, president of the Federal Reserve Bank of Cleveland, makes an appearance in the wonky part of this Wall Street Journal story about Fed efforts to keep the economy steady.

Investors will look this week to talks by Fed Chairman Jerome Powell and Vice Chairman Richard Clarida for new clues on the officials' thinking, as well as Wednesday's release of minutes from the Fed's December meeting.

The Fed's job has become more difficult as the partial federal government shutdown continues. Many economic data releases it uses to get a read on the economy, including a scheduled report this week on durable goods orders, are being delayed because of the closure.

Toward the end of the article, The Journal notes that a bond-market development "that traditionally has been a harbinger of recession is also flashing warning signs: the narrowing gap between short- and longer-term Treasury yields."

The gap, the newspaper says, "typically shrinks when the Fed raises short-term rates. When short-term Treasury yields rise higher than longer-term yields, a so-called inverted yield curve, it often is a sign that investors believe the economy is slowing and in need of lower rates. A recession has almost always followed within a year or two. The spread on three-month and 10-year Treasurys has fallen to 0.15 percentage point, down from 0.86 percentage point at the end of September. It is near levels seen in December 1994 and June 1998, two other periods in which the spread tightened but didn't turn negative."

Mester says of that data, "Maybe that's telling you something about either market expectations about policy or … the economy."

Even so, Mester says she still expects steady growth that will warrant higher rates this year, adding, "I'm in a position now where I don't feel there's urgency."

THIS AND THAT, POLITICS EDITION
• A Washington Post op-ed encourages Democrats to look to a figure from their past — former U.S. Sen Hubert Humphrey of Minnesota — to chart a productive future, and it identifies U.S. Sen. Sherrod Brown of Cleveland as among those best positioned to help the party do that. Arnold A. Offner, the Cornelia F. Hugel professor of history emeritus at Lafayette College and author of "Hubert Humphrey: The Conscience of the Country," argues that Humphrey's "clear principles and legislative proposals on topics such as civil rights and health care offer a path to a robust and moral Democratic agenda — one that can propel the party to success again." He names three Democrats with "fine records and the ability to inspire fellow citizens as Humphrey did:" Sen. Amy Klobuchar, a fellow Minnesotan; Sen. Elizabeth Warren of Massachusetts; and Brown. To succeed, he concludes, "they must pick up Humphrey's mantle. They must restore genuine concern for the 'underprivileged and oppressed' and proud, progressive policies — including 'true health care for all' — to the core of the Democratic agenda. That will open the way for all Americans to 'see a better vision of what we can become' and share in that reality."

• Politico takes a look at President Donald Trump's efforts to tighten his "iron grip" on the Republican Party, and to avoid a replay of the convention chaos of Cleveland in 2016. The website points out that shortly before the holidays, Trump political aides Bill Stepien and Justin Clark "held a conference call with Republican state party chairs, who traditionally play an outsize role in picking delegates. Last week, the two advisers began having one-on-one calls with the state chairs to describe the campaign's mission and discuss various circumstances in each state." Politico notes that Trump critics "say the delegate offensive smacks of desperation." For instance, John Weaver, an adviser to Ohio Gov. John Kasich, who is considering challenging Trump for the nomination, said the president is trying to solidify the party apparatus behind him ahead of special counsel Robert Mueller's report. Even so, Politico says, "Trump's aides are determined to keep the 2020 convention as drama-free as the 2016 convention in Cleveland was chaotic," when supporters of Texas Sen. Ted Cruz disrupted the proceedings. "Many of the Cruz-supporting delegates earned slots in Cleveland because in the months leading up to the convention, the Texas senator outmaneuvered Trump by organizing at a series of local and state party gatherings where delegates were chosen," Politico says, pointing out a situation that Trump doesn't want repeated.