By Rebecca Picciotto | Photographs by Sylvia Jarrus for WSJ

The struggle to find a cheap house in America is transforming some places with lower-priced homes into battlefields, pitting Wall Street landlords and other investor-owners against traditional buyers.

That clash is helping boost home values in Toledo, Ohio, catapulting it to the top of The Wall Street Journal/Realtor.com Housing Market Ranking this quarter. The rankings identify top markets based on home value appreciation, local economic growth, lifestyle amenities and climate resilience.

Toledo represents one of the increasingly rare affordable housing markets in the U.S. The city of about 265,000, situated on the western tip of Lake Erie and home to growing businesses such as clean energy and digital infrastructure, has become a haven for buyers seeking low living costs in a centrally located midsize metro area.

The median list price in Toledo jumped 18% annually in March to $235,000, according to Realtor.com. That is still about $200,000 cheaper than the national median, the firm said.

Many out-of-state investors view the lower home prices in Toledo and other heartland cities as a cheaper entry point than popular markets in the Sunbelt.

"This market is a little gold mine in America," said Jack Garayan, who rents out two single-family homes and an eight-unit apartment complex in the Toledo metro area.

Garayan lives in Fresno, Calif. He has never set foot in Toledo, and he currently has no plans to visit. But he and two friends see their Toledo real-estate portfolio as a retirement fund. Over the past year, their single-family rental homes have both appreciated 50% or more. The first went from $133,000 to $200,000 and the second from $137,000 to $220,000.

The overall share of Toledo single-family homes purchased by investors has crept steadily upward, doubling from 15% in February 2018 to 30% in February of this year, according to data firm Cotality, formerly known as CoreLogic.

"There's been a lot of demand from Wall Street," said David Mann, president and chief executive of the Lucas County Land Bank.

Jon Modene, a Toledo real-estate broker, said investors from New York City, San Francisco, Italy and Canada have become a much larger portion of his client base over the past decade. His biggest client is a hedge fund.

LadderUp Housing is working on behalf of the city's less well off. The Toledo company acquires homes for low-income residents and has purchased 49 homes since 2021. About 75% of that portfolio was previously owned by either limited-liability companies or sellers who didn't live in the house as their primary residence, according to Chief Executive Tom Voutsos.

Surging demand means trouble for traditional buyers as the house hunt gets more competitive than ever and prices rise higher.

Leah and Nell Zimmerman, both born and raised in Toledo, felt the sticker shock firsthand when they started looking to purchase a home in late November. They expected the home buying process to be just as smooth as when their parents bought in Toledo a generation earlier: Find a house, make one offer, get accepted, move in.

"It was not that simple," said Nell, who is 44 and works in customer service and podcasting.

The Zimmermans found themselves competing against all-cash buyers bidding well over the asking price, sometimes a sign of an investor. The couple's offers, backed by a loan from the Federal Housing Administration, struggled to keep up. They lost five bids before their sixth finally got accepted.

"We were just getting completely blown out of the water each time," said Leah, a 49-year-old nurse at the University of Toledo Medical Center. The couple is expecting to close on the house in mid-May, months later than they originally expected.

The demand for housing is a boon for sellers. Natalie Hood, a 39-year-old special-education preschool teacher who grew up in Toledo and still lives there, said she received more than 20 offers on her home in 2021, including an all-cash bid, which she declined.

"There are a lot of cash offers right now," said Tim Fisher, a Toledo real-estate agent. Paying all cash upfront and forgoing home appraisals are typical investor moves to make their bids more appealing, real-estate agents say.

Toledo is within driving distance from the Detroit airport and other urban centers such as Cleveland and Columbus. And Toledo residents rave about community attractions like the local zoo, art museum and the downtown baseball stadium where die-hard sports fans root for the minor league Mud Hens.

The city is considered less of a natural-disaster risk, which can keep home insurance premiums down.

First Solar got its start in the Toledo metro area and Meta is building an $800 million data center in a suburb right outside the city. Stellantis has a big Jeep-building factory in the city. Dubbed the Glass City, it is the headquarters of manufacturers like Owens Corning and Libbey.

For all of its perks, Toledo has experienced declining population growth for decades, compounded by the 2008-09 financial crisis. And the unemployment rate was 6.6% in February, the highest of the top 20 metros on the WSJ/Realtor.com index. For investors, the lack of a major boom in Toledo is what makes it a hidden gem.

"An enormous amount of this attention is being driven by investor capital that's looking at a pretty good buy," said Mann of the Lucas County Land Bank. "Because we just haven't been on people's radar for a long time."

News Corp, which owns the Journal, also operates Realtor.com.

Write to Rebecca Picciotto at Rebecca.Picciotto@wsj.com

(END) Dow Jones Newswires

April 26, 2025 05:30 ET (09:30 GMT)

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