BusinessReport.com

Editor’s note: This is the second in a series of occasional reports on residential real estate trends in various neighborhoods around the metro area.

Heather and Adam Werth paid $86 a square foot for their Capital Heights home when they bought it in 2002, which was average back then for post-war cottages in the charming but modest neighborhood.

At the time, the Werths thought they’d made a good investment; now they know they did. Average home prices have increased more than 60% in the five years since their purchase. Even more significantly, there’s an increase in the number of owner-occupied properties in the neighborhood along with a noticeable amount of gentrification.

“There’s a lot of beautification that you can see when you drive around,” says Heather Werth, a mother of two. “People’s gardens look so much better than just a few years ago, and you see more families, too.”

Once considered a second-tier alternative for those who couldn’t afford the Garden District or Old Goodwood, Capital Heights is now coming into its own. The area—bounded by Government Street, South Foster Drive, South Acadian Thruway and Jefferson Highway—is appealing to buyers who are seeking out the centrally located neighborhood for its many advantages: convenience, charm and still-affordable older homes.

“There’s been more demand for it in the past couple of years,” says Marcia Balcom, a real estate agent with CJ Brown Properties who until recently lived in the neighborhood. “In years past, people settled for Capital Heights. Now it’s desirable in and of itself.”

The surge in home prices reflects that level of interest. In just three years, the average home price has increased 23%, from $125,000 to $154,000. The average price per square foot, meanwhile, has jumped from $105 to $135, a growth of 29%.

While part of the increase was fueled by the post-Katrina housing demand, the interest in Capital Heights had started even before the hurricane. More young buyers were snatching up the homes and renovating them. Fewer were purchased as rental properties. “I haven’t sold a home to an investor in years,” Balcom says. “They’re all owner-occupied now.”

Another trend has been the conversion of multiplex properties to condos. Those that have been redone are selling fast—and realtors wish there were more on the market.

“We recently handled a condo conversion on South Foster, and they sold like hot cakes,” says Realtor Vicki Spurlock of Locations Realty.

For a family like the Werths, the improvements have been welcome. They’re particularly excited about a proposition to convert Capital Heights Avenue to a one-way street with a bike path. Though the plan has encountered some opposition from older residents in the area, it’s generating a lot of support among younger homeowners—especially families.

“Something like that would be great,” Werth says. “It would do so much to make the area even nicer.”

What Capital Heights might need more than a bike path, however, is a better retail corridor. Two abandoned shopping centers on Government Street—the Westmoreland Shopping Center at Acadian and the former Winn-Dixie site between South Foster Drive and Jefferson Highway—hold potential as catalysts for economic development in the area. Instead, real estate agents say they’re both liabilities at the moment.

“The closer you get to Government Street, the more apprehensive people are. People don’t want to be that close to it,” says Realtor Adrien Flaherty of Locations, who notes that the homes several blocks from Government Street sell more quickly than those closer to the major thoroughfare.

Spurlock believes a better mix of smaller, specialty retailers would go a long way toward overcoming those attitudes. Homeowners wouldn’t mind being close to Government Street if the thoroughfare was cleaner and offered more attractive shops and restaurants.

“If they could make it like the little hub at the Perkins Road overpass, it would make the neighborhood equally as popular as University Gardens and Southdowns,” Spurlock says. “But they don’t seem to maintain the same business dynamic.”

That will likely change at some point. Though the most recent proposal for redeveloping the Westmoreland Shopping Center fell apart earlier this spring for the second time in as many years, there’s been no shortage of interested parties. Common sense suggests it’s only a matter of time before someone can make a deal work at that location. Once that happens, realtors say, Capital Heights will be off the charts.

“We feel like until Government Street really makes that transformation, it’s going to hold subdivisions like Capital Heights back a little bit,” Spurlock says. “Once that transformation takes place, the neighborhood is just going to take off. There’ll be no stopping it.”