The East End Real Estate Bubble (Pittsburgh, Allentown: sale, apartment, leasing)

[Pitt Chick]

I fail to see where this is a real estate bubble....

[Geeo]

It's not a bubble. There were very few apartment complexes built for years and years here. Now there are new people moving in who want new construction and developers are starting to build to fill the need. There's a pent-up demand.

[selltheburgh]

I have theories about all of these units being built regarding their impact on the East End. I honestly wish I had access to investors and / or that kind of capital.

I wish there was more infill for sale housing because there's a serious shortage. I'm not talking about a lack of housing under 100k or a lack of houses for the same price as a Prius, but 200-300k houses. That's lacking in the east end and because of that, there's a larger rental demand.

Pittsburgh had a 9% rental rate increase last year while NYC was somewhere around 4%. This will take some pressure off of rising rents for a while since the demand is obviously there.

These apartments are going to force smaller landlords to either step up their game with amenities and/or finishes or possibly lower their rents. Slummy apartments that aren't in a prime location (blocks off of walnut) are going to have to clean up a bit or they're going to struggle.

I said a few years ago that Lawrenceville might be in a bubble. That was when prices were in the mid-200k range. Now they are fetching sales prices that easily start with 300k and even some in the 400's. There's a house on Main Street just listed that is priced over 500k.

All of this concentrated development north of Centre Ave is going to cause spillover into other neighborhoods. Areas like Troy Hill, Millvale, Larimer, etc are already seeing spillover investment. Even some in Homewood.


This will all be an issue if the financing on these places are Libor ARMs and that index hits pre-911 levels coupled with another recession. Both of those happening at the same time is unlikely, plus there's usually a cap on rate increases over 5 years.

[Der Schwabe]

Originally Posted by selltheburgh

I said a few years ago that Lawrenceville might be in a bubble. That was when prices were in the mid-200k range. Now they are fetching sales prices that easily start with 300k and even some in the 400's. There's a house on Main Street just listed that is priced over 500k.

Not to put it too simply, but how high can a row house go, in your opinion? Do you think the people who purchase in the 300 and 400s are looking at any significant appreciation down the road?

[selltheburgh]

Originally Posted by Der Schwabe

Not to put it too simply, but how high can a row house go, in your opinion? Do you think the people who purchase in the 300 and 400s are looking at any significant appreciation down the road?

It all depends on the property. Probably average or minimal appreciation, but really there's no predicting it.

If Lawrenceville keeps growing, connects to the strip, the bunch project happens, a river front trail is added and then development along the river, it could continue to grow.

10 years ago 200k in Lawrenceville was considered pretty much insane. But people were buying for under a hundred and putting tons of money into properties to renovate them. They were taking risks that nobody would have thought made financial sense. Now some of those houses are reselling for big bucks.

People are paying 200k+ for nice houses in the 10th ward. Unheard of 2 years ago.

There are still a lot of houses that are run down in Lawrenceville, so I can see those houses being brought up to higher levels (100k renovated into 300k houses) before 300k houses become 400k houses just through appreciation.

People paying 300k for a house in lawrenceville aren't doing it because they expect their house to appreciate rapidly. They are doing it because the house is pretty much finished, they like the location, they are busy and don't have time for a fixer upper, they have a low interest rate and want to enjoy conveniences of city living. They hope their investment holds its value and if the time comes to sell, they can get out easily, but they aren't speculating. Speculators bought 5-10 years ago.

[grep]

Originally Posted by Der Schwabe

Not to put it too simply, but how high can a row house go, in your opinion? Do you think the people who purchase in the 300 and 400s are looking at any significant appreciation down the road?

~2 years ago I thought we had reached the point of inflection in Lawrenceville, and that while prices would continue to rise, they would rise at a slower rate because they had recently increased so much and were close to "topping out". Clearly I was wrong. Frankly I find the meteoric appreciations in LV and Bloomfield to be confusing and ever so slightly troubling because of this. Why did everyone decide in the last two years that these places were so amazing? Apart from some new businesses opening, I don't think these neighborhoods, especially Bloomfield, have changed that dramatically recently. I'm not saying that they're overvalued, just that I don't get where all these buyers are coming from and where they were before. Perhps STB has more insight.

[grep]

As an addendum, I feel like one of the biggest changes is perception. When I first moved to Bloomfield, people never had much to say about it. When I moved to Lawrenceville, they said "Oh, I've heard that area is up-and-coming." Now people comment on how nice Lawrenceville is, or don't feel the need to say anything at all because the fact that I chose to live there is no longer remarkable (meaning interesting to remark on; in my opinion it was never remarkable in the "amazing" sense). And whenever I hear people talk about Bloomfield now, there are always positive things being said. But I'd hope that people buying houses are not taking this "popular perception" metric very seriously.... are they?

[Goinback2011]

There's a shortage of rentals in the East End, accounting for the high rents there. Adding supply is the natural response.

No bubble.

[selltheburgh]

Originally Posted by grep

~2 years ago I thought we had reached the point of inflection in Lawrenceville, and that while prices would continue to rise, they would rise at a slower rate because they had recently increased so much and were close to "topping out". Clearly I was wrong. Frankly I find the meteoric appreciations in LV and Bloomfield to be confusing and ever so slightly troubling because of this. Why did everyone decide in the last two years that these places were so amazing? Apart from some new businesses opening, I don't think these neighborhoods, especially Bloomfield, have changed that dramatically recently. I'm not saying that they're overvalued, just that I don't get where all these buyers are coming from and where they were before. Perhps STB has more insight.

They are a combo of renters turned homeowners, out of town buyers.

I keep hearing from transplants about how undervalued Pgh is. These include people who have been here for 4+ years.

[gg]

Bubble and Pittsburgh in the same sentence is pretty funny! Thanks for the laugh. Pittsburgh is increasing in size a little, but lets not get carried away. There is hardly some bubble and there certainly isn't one to come in the next few years. Goodness, there is a need for more newer housing options to say the least.