Allegheny Property Tax System (Pittsburgh, California: lawyers, houses, neighborhoods)

[Hopes]

I won't disagree, scrapp. The problem comes from not being informed. Since the OP has been informed, the OP can make smart decisions to minimize potential problems. It would be interesting to know where the OP lives. With the housing market problems throughout the United States at this time, Pittsburgh is utopia by comparison in many ways.

[llawrence]

Originally Posted by Hopes

I won't disagree, scrapp. The problem comes from not being informed. Since the OP has been informed, the OP can make smart decisions to minimize potential problems. It would be interesting to know where the OP lives. With the housing market problems throughout the United States at this time, Pittsburgh is utopia by comparison in many ways.

Pittsburgh is cheap, but not that cheap. The high property taxes cut the difference enormously. For every $2500 increase in property taxes, the cost of hr house goes up About $50K - and and unlike you never pay off the property taxes. Worst, the property taxes in Pgh are astronomical as a fraction of the house value. I saw $350-400K houses with current property taxes of 10-12K!!! Where I live, the house would have to be well over over a $million to have those kinds of property taxes.

Plus, one reason that average prices seem so much lower in Pgh is that there is much less new construction than in most big cities. My neighborhood, for example, has absolutely boomed in price. But much of the increase has occurred because developers bought old houses, knocked them down and put up a new house that sell for 2 1/2 times more on the same lot. On paper, the average house prices have skyrocketed. In reality, the increase of any given house is far less dramatic.

This is one reason that you shouldn't believe what you read about house prices falling. Much of this is due to the developers halt in building and an oversupply in distant suburbs where there is no strong inherent demand. I live in town in a big city where lots of people move. House prices haven't fallen here to any real degree. I suspect that this is the general rule. Supply and demand is always the most important factor.

Pgh at first glance is relatively cheap. You can buy nice house in Pgh for $300-400K. I can't remember the last time I saw *any* house that cheap where I live. But "cheap" is not such a simple concept. Cheap can mean value, not just amount spent. In the "expensive" big cities, you pay more for a house but it it might appreciate 7%. In Pgh, you buy a house and it appreciate at 3%. Now, after 10 years, which house was the better deal and was really cheaper? Which was a better value? When it come time to retire and reverse mortgage the house, who is going to be better off? The guy with the "cheap" house in Pgh or the guy with the "expensive" house in Boston or New York? See, cheap isn't such a simple concept. Because Pgh shrinks while other big metro areas grow, Pgh will continue to fall further behind in house prices. Supply and demand.

I know plenty of people who bought houses in Pgh 10-15 years ago and now cannot move because they are priced out of the housing market in other cities due to the lack of appreciation on their current homes. In other words, you buy in Pgh and stay for while, and you are there for the long term, like it or not.

All of this is why I'm only willing to move to Pgh if I can find a decent house cheap enough to keep my current place as a lifeline. In fact, that, and the fact that I'm a native, are the only reasons that I'm even considering Pgh. I like it the city, but it is hardly mean dream destination. The property taxes are the issue that swings the decision one way or the other. If I have to pay 8K, let alone 10-12K, then Pgh isn't such a bargain.

[Hopes]

I said in a previous post that Pittsburgh isn't the type of city to make 100k in a year on housing prices. I also said you have to live here a lifetime to realize a huge profit. Housing prices across the country have dropped by hundreds of thousands but not in Pittsburgh. That's the benefit of not living in a boom real estate market. Housing prices don't drop. There are people across the country carrying mortgages that are sometimes 500k more than the value of their houses right now. That doesn't happen in Pittsburgh. That's what I meant by utopia compared to the rest of the country. You live in one of those more expensive markets, and that's the risk you take. People who got stuck in Pittsburgh because they were priced out of the other markets should be relieved. They could be in a worse situation if they had moved to a more expensive market two years ago.

[pman]

does anyone have information on what taxes comprise the city of pittsburgh's budget? making money on houses is what caused the problem. somehow people though that houses add value, they are consumption and without jobs to pay for increases, the value will eventually come down. new homes don't cause higher prices, new homes are built where higher prices can be fetched, primarily through the irresponsible increase in mortgage debt.

[llawrence]

Originally Posted by Hopes

I said in a previous post that Pittsburgh isn't the type of city to make 100k in a year on housing prices. I also said you have to live here a lifetime to realize a huge profit. Housing prices across the country have dropped by hundreds of thousands but not in Pittsburgh. That's the benefit of not living in a boom real estate market. Housing prices don't drop. There are people across the country carrying mortgages that are sometimes 500k more than the value of their houses right now. That doesn't happen in Pittsburgh. That's what I meant by utopia compared to the rest of the country. You live in one of those more expensive markets, and that's the risk you take. People who got stuck in Pittsburgh because they were priced out of the other markets should be relieved. They could be in a worse situation if they had moved to a more expensive market two years ago.

This is pure rationalization. Pittsburgh is far from a housing Utopia. Sure, out of the history of real estate, you could pick a couple of short term windows when you could make a case for Pgh. But the long term is clear. Buying a house in Pgh is a losing financial proposition.

1. There is not secret to what controls house prices, supply and demand. The simple fact is that house prices go up faster when there is a bigger demand, short term trends not withstanding. Pittsburgh is shrinking and other big metro areas are booming. They will contionue to go up faster than inflation while Pittsburgh will be lucky to keep up with inflation.

2. Further, I already pointed out that much of the housing bust you see reported is fiction. It is due to the decrease in new construction and the oversupply in distant suburban areas where the intrinsic demand is low. In the city cores where demand is high has seen little decrease. Like I said, prices in my area have dropped little if at all.

3. You ignore property taxes, which are astronomical in Pgh. That's money you never get back. And money that doesn't appreciate. That's closer to real estate hell than real estate utopia.

The bottom line is this: Even with the supposed down turn, you still couldn't move from Pgh elsewhere. And the difference will only increase over time due to the inherent supply/demand factors. Like I said, you can by a decent house for $300-400K in Pgh where there are no houses of any description that cheap where I live, which is probably not near the most expensive metro area.

[user_id]

Originally Posted by llawrence

you pay more for a house but it it might appreciate 7%. In Pgh, you buy a house and it appreciate at 3%..

To what degree your house is going to appreciate is purely speculative and no city can continue to appreciate much above the rate of inflation long term.

Unless you have a crystal ball buying an expensive house and thinking appreciation is going to make things right in 20 years or so is just gambling.

Anyhow, looking at the median house price etc in Pittsburgh can be really deceptive though. Under these measures Pittsburgh housing looks cheaper than it really is.

Originally Posted by llawrence

Buying a house in Pgh is a losing financial proposition.

Give me a break. The primary benefit to owning a home is in its "dividends", namely that you have a place to live. In Pittsburgh owning tends to be cheaper than renting therefore its in no sense a "losing financial proposition".

But also, in terms of home appreciation you are speculating about Pittsburgh's future. If Pittsburgh starts to turn around in say 10 years and grows noticeably in 20-30 years than Pittsburgh housing will see pretty dramatic appreciation. Some Pittsburgh neighborhoods have actually appreciated nicely over the last 10 years or so because they have been gentrifying (e.g., South side, Regent Square).

Home appreciation is impossible to predict. There is no way to know what is going to happen to a given city or neighborhood.

Originally Posted by llawrence

Like I said, prices in my area have dropped little if at all.

So what? Not every single area is having problems, primarily the areas that were previously "hot". But these areas are seeing declines across the board. Although, the low/med end housing is collapsing faster, but it also appreciated more over the last 5~10 years too.

Lastly, you can buy a decent house in Pittsburgh for far less than $300-400k both in the city and its most attractive suburbs.

[Pitman]

you can by a decent house for $300-400K in Pgh

You can live like a king for $300-400k in Pgh. You can get a decent house for 80K.

[BrianTH]

A few things to note about homes and appreciation:

Robert Shiller's data indicates that the long-term national trend prior to the bubble was for homes to barely appreciate more than inflation. This makes sense because in most cases housing supplies can respond to local demand relatively quickly. As a result, the main source of your real return on homeownership is actually the value of living there, not appreciation.

And speaking of which, when comparing locales with significantly different home prices you either have to account for the value of living in a nicer home for the same cost, or being able to live in an equally nice home for a lower cost. And in the latter case you need to account for what you do with the savings. To slightly oversimplify, you might imagine taking the funds you would have otherwise put into a higher down payment, higher mortgage payments, and higher insurance payments and investing those instead in something relatively safe. Of course you also have to account for property taxes too, but even then you have to consider what property taxes would have been on an equivalent home, not a home priced the same.

[user_id]

Originally Posted by BrianTH

Robert Shiller's data indicates that the long-term national trend prior to the bubble was for homes to barely appreciate more than inflation.

Sure, but this is on the national level which flattens matters. When you look closer there are all sorts of hills, valleys etc etc. A home can appreciate wildly over time or it can become worthless, but on average the trend is with inflation.

[BrianTH]

Originally Posted by user_id

Sure, but this is on the national level which flattens matters. When you look closer there are all sorts of hills, valleys etc etc. A home can appreciate wildly over time or it can become worthless, but on average the trend is with inflation.

Absolutely, and I agree with your prior post that this variation exists right down to the neighborhood level (meaning different neighborhoods in the same city can experience very different tracks over the same time period). Generally, I acknowledge I wasn't really adding anything to your prior post in terms of facts, other than the reference to Shiller.