Another list: Pittsburgh among 10 Cities Primed for a Real Estate Recovery (Sewickley: crime, neighborhoods)

[BrianTH]

Originally Posted by Katiana

1/3 of Denver City/County is the airport. If you redraw Pittsburgh's boundaries, be sure to include the airport, which is not included now in the city limits. These comparisons can get kind of complicated.

Sure, but that isn't the procedure I was actually suggesting (trying to draw a hypothetical City of Pittsburgh the same size as the City/County of Denver). Rather, the Census has already done the hard work for us by coming up with the Urbanized Area maps, which use a consistent definition and thus allow a straightforward apples to apples comparison.

Here are some numbers, by the way. The Denver Urbanized Area had 1,984,889 people in 2000, good for #20. The Pittsburgh Urbanized Area had 1,753,136 (#22), and the Portland Urbanized Area had 1,583,138 (#23).

Note those rankings are much closer to the 2000 Metro Area population rankings (Denver #19, Pittsburgh #22, Portland #23) than the municipal population rankings (Denver #24, Pittsburgh #51, Portland #28). That makes sense, because development patterns are not that much different in these different metro areas such that the central urban areas should be ranked much differently from the metro areas.

So to sum up, I am noting the different sizes of the cities in question just to help illustrate the problem. But my solution is not to try to redraw the maps on an ad hoc basis, but rather to make use of the Census-defined urbanized areas instead.

[user_id]

Originally Posted by BrianTH

Again, though, I don't think prices are out of line with rents and incomes

Yeah, I disagree with this. I don't think the prices in some of the "nice neighborhoods" are connected to fundamentals. Take for example the communities around the universities. These are largely supported by the universities and the vast majority of both staff and faculty can't afford much beyond around $180k~$200k a year. Yet most of the decent houses in this communities are more than that. This coupled with the fact that most of the appreciation in this communities occurred during perhaps the only national housing bubble this nation as seen lends me to believe the prices are inflated.

Originally Posted by BrianTH

If you redrew a hypothetical City of Pittsburgh that was roughly the same size as Denver or Portland, you would get roughly the same number of people.

Here is the problem, there is no way to "redrawn" the map and end up with Portland or Denver. Even to ignore the fact that these are growing cities, there are many differences beyond that. Making direct comparisons just does not work well.

I think the belief that Pittsburgh is a "bargain" is likely mistaken, at least generally speaking. For some, it could be a great deal though.

Originally Posted by BrianTH

Not necessarily in your local neighborhood.

You can't walk a few blocks without experiencing some degree of urban decay in Pittsburgh. Its everywhere.

Originally Posted by BrianTH

But that actually doesn't make much sense: if there is more demand, you would expect supply to increase to meet that demand, and you would end up with the Portland and Denver urbanized areas being bigger.

What are you talking about? Being bigger than what? Pittsburgh? You do realize that both Portland and Denver are younger cities in the sense that most of their growth has been recent. You appear to be saying something rather silly. Pittsburgh's population has cut in half since the 1920~1930's where as both Portland and Denver have doubled in size since then.

Clearly, the increase in demand is being meet with an increase in supply and the areas are growing, unlike Pittsburgh.

Originally Posted by BrianTH

Nor was I confused. I was using Pittsburgh neighborhoods like Shadyside and Squirrel Hill.

Exactly, despite the fact that those are the "good neighborhoods" of Pittsburgh they are still relatively run down. They don't really compare to the "good neighborhoods" of Portland and Denver nor many other cities.

Originally Posted by BrianTH

and I think we are entering a period in which there will be a structural increase in prices in central locations (driven by demographics, energy prices, preference trends, and so on).

I don't, they are simply too expensive. The younger generations can't afford it, I'd be more inclined to put my money on areas outside of big cities with extremely affordable housing. That is where I see a lot of young people buying homes...not over priced urban housing targeting rent seekers...I mean "young professionals".

Originally Posted by BrianTH

Again, people cross-shop the City and the inner suburbs, so you simply cannot draw a wall around the City and pretend it is an isolated real estate market.

Detroit shows nicely that demand outside of the city does not necessary mean anything for the city. Sure people cross-shop and if demand is increasing outside of the city people may instead move to the city if the price is right.

Originally Posted by BrianTH

Robots take up less space than the assembly line of people you would need to do the same job. Moreover, since they are much faster, you can meet the same inventory flow with fewer assembly lines.

Both of these are in general false. In fact usually it takes up more space.

Originally Posted by BrianTH

OK. Most U.S. goods produced will likely be consumed by U.S. consumers, as is the case now.

Most goods consumed by Americans are not produced by Americans. Look around your house and tell me how many "Made in USA" labels you find outside of food stuffs. That is unsustainable. Nobody is interested in importing corrupt US financial services, a rent seeking legal and health system, etc. Our services are largely useless to others, we need to make more goods both for our own consumption and to trade with others.

Originally Posted by BrianTH

The Chinese will prefer to consume locally-produced goods and services where that makes economic sense, and trade for goods and services when that makes sense. There is no fundamental difference between goods and services when it comes to this logic.

Not in itself, but services are harder to export and US services are not particularly desired. I'm sure after triggering the largest financial crisis since the depression, people are going to be jumping all over our financial products, the Chinese are about as interested in our legal system as they are getting root canals, etc.

The Chinese do not want to be dependent on US imports of key industries and their nation is large enough to rid themselves of that dependence. Sure, they may buy some of our Corn, Rice, etc but they don't want to buy our semi-conductors, planes, etc. They want to make them.

Originally Posted by BrianTH

We'll see if they really make a lot of changes....

They already have made a lot of changes....

Originally Posted by BrianTH

The U.S. already produces most of what it consumes.

Not physical goods.

Originally Posted by BrianTH

Just what it says: despite all the talk of a crisis, U.S. production of goods actually has been more or less steadily increasing

C'mon, if the population increases the production of goods can go up in the aggregate yet go down as a percentage of GDP.

Originally Posted by BrianTH

That is why production of goods won't entirely disappear. But it will remain a shrinking sector of the economy for the conceivable future.

Huh? You just said it was growing.

Originally Posted by BrianTH

That just shifts where the person is located. They still take up space wherever they are.

You serious? Our you imagine that people go home to their card-board boxes after work? Let's see, before telecommuting you have 1.) office, 2.) home. After telecommuting you have 1.) home. Sounds like a net decline in space, because ahem...the space that was previously unused during the day is now being used.

Originally Posted by BrianTH

There is a reason why some firms cluster in cities. This must be true, because this has always had costs, .

I'm not talking about why firms cluster in cities in general. I'm talking about the fact that doing business in Pittsburgh is expensive relative to doing business outside of Pittsburgh. I don't think its an accident that the vast majority of big businesses in Pittsburgh are as old as dirt and likely get special treatment. Doing in business in Pennsylvania is bad enough, put Pittsburgh taxes, etc on top of it and it gets really out of hand.

With the exception of firms that want to be real close to the universities or service the local community, most start-ups in the area seem to go outside of the city.

Anyhow, Pittsburgh is not a desirable place to do business. Until that changes I really don't see how the city will do much beyond sustaining its current economy.

[BrianTH]

Originally Posted by user_id

Take for example the communities around the universities. These are largely supported by the universities and the vast majority of both staff and faculty can't afford much beyond around $180k~$200k a year. Yet most of the decent houses in this communities are more than that.

Shadyside and Squirrel Hill homeowners include not just faculty (less so staff) from the Universities, but also doctors from the hospitals, professionals who work Downtown, business owners, wealthy retirees, and so on. At about a 3-4 ratio of home prices to gross household income, I think you would find a lot of support for even the more expensive homes.

This coupled with the fact that most of the appreciation in this communities occurred during perhaps the only national housing bubble this nation as seen lends me to believe the prices are inflated.

I don't think that is correct, actually. There has been steady appreciation all along, and to the extent it accelerated it really started in the mid-late 1990s. The national bubble came later and didn't do much, if anything, to further accelerate the appreciation rate in these neighborhoods.

Making direct comparisons just does not work well.

There are limits to how precise these comparisons can be, but when you are talking about actual multiples in prices and not just small differences, those imprecisions aren't enough to change the basic picture.

I think the belief that Pittsburgh is a "bargain" is likely mistaken, at least generally speaking. For some, it could be a great deal though.

Obviously housing prices are only one factor among many when making decisions about where to live. I just think it is hard to deny that after controlling for other factors, housing prices in Pittsburgh are relatively low (not uniquely, though--there are a few other cities with equally if not cheaper housing).

You can't walk a few blocks without experiencing some degree of urban decay in Pittsburgh. Its everywhere.

I don't know what "some degree of urban decay" means. If you are talking about things like lots of unkempt vacant lots and boarded up buildings, this isn't true in places like Shadyside and Squirrel Hill. If you are talking about seeing some houses that could probably stand some renovation, that is another matter. That, of course, is true of pretty much any older neighborhood in U.S. cities--I saw plenty of places in, say, Georgetown in Washington that could stand some repainting.

Pittsburgh's population has cut in half since the 1920~1930's where as both Portland and Denver have doubled in size since then.

I know, which is why housing is cheaper in Pittsburgh. But you seem to be resisting this straightforward explanation.

Clearly, the increase in demand is being meet with an increase in supply . . . .

Right, which means the price difference is a supply side effect and not a demand side effect. Again, the explanation for why Pittsburgh has cheap housing is just that as a city that lost a lot of population, Pittsburgh has an oversupply of historic housing which keeps all the housing in the area less expensive. You seem to want to alternatively deny there really is cheap housing or explain it with other causes, but this is really a pretty straightforward situation.

Exactly, despite the fact that those are the "good neighborhoods" of Pittsburgh they are still relatively run down.

I honestly have no idea why you would think Shadyside and Squirrel Hill are "run down", subject to the understanding they are mostly historic neighborhoods.

I don't, they are simply too expensive. The younger generations can't afford it, I'd be more inclined to put my money on areas outside of big cities with extremely affordable housing. That is where I see a lot of young people buying homes...not over priced urban housing targeting rent seekers...I mean "young professionals".

There is indeed currently a problem with even young professional couples not being able to afford housing in central locations in many cities (although not so much Pittsburgh). Part of that is because changing demographics (basically more retirees) is driving up demand on top of changing preferences. The likely long term result is infilling with more units, although in some cities even that will be a challenge, which I think in turn will give a competitive advantage to cities with excess capacity in central locations. This should bode well for not just Pittsburgh but many post-industrial interior cities.

The problem with moving outward to cheap exurbs is that in addition to preferences shifting toward more urban living, you are also then adding greater costs in terms of commuting and energy usage, and both of those costs are increasing over time. Accordingly, we have actually seen some of the greatest prices decreases and foreclosure rates in exurbs, and we may be moving to a more common model internationally where the "ghetto" areas end up being out in the suburbs and exurbs.

Detroit shows nicely that demand outside of the city does not necessary mean anything for the city.

Detroit is a unique case. And the contagion is spreading outside the city limits.

Sure people cross-shop and if demand is increasing outside of the city people may instead move to the city if the price is right.

Or vice-versa. Generally, on a regular basis here we have people cross-shopping places like Squirrel Hill and Mt. Lebanon, and my neighborhood (Regent Square) actually contains four municipalities. This is really all just historically contingent: if Pittsburgh had been more aggressive about annexation, places like Mt. Lebanon, Swissvale, and so on would be part of the City instead of separate municipalities. Anyway, the economic result is that as long as there are a decent number of people cross-shopping, prices in the cross-shopped neighborhoods act as marginal contraints on each other.

Both of these are in general false. In fact usually it takes up more space.

We appear to have very different understandings of the facts. I know that automation allowed GM to produce the same amount of cars using a lot less factory space. I have seen this overall trend in manufacturing described many times.

Most goods consumed by Americans are not produced by Americans.

You reversed what I claimed. I said most U.S. goods produced are consumed by U.S. consumers, which is true.

Our services are largely useless to others.

I believe we exported something like $550 billion in services in 2008, with gave us a trade surplus in services of something like $144 billion.

The Chinese do not want to be dependent on US imports of key industries and their nation is large enough to rid themselves of that dependence. Sure, they may buy some of our Corn, Rice, etc but they don't want to buy our semi-conductors, planes, etc. They want to make them.

So how then can we grow our economy counting on exporting goods to places like China? You are basically painting a picture of China not importing anything. Of course a smart China will not really try to eliminate imports, because that is bad for any economy in the long run.

They already have made a lot of changes....

Like what exactly? Not what they have said, but what they have actually done.

Not physical goods.

OK, but something like 66% of U.S. personal consumption was of services in 2007, and this number has been slowly growing over time.

C'mon, if the population increases the production of goods can go up in the aggregate yet go down as a percentage of GDP. . . . Huh? You just said it was growing.

Right, U.S. production of goods is increasing in real terms, but it is declining in significance as a percentage of total U.S. production. And thanks to labor productivity gains, it is declining even faster as a percentage of jobs. And these trends are inevitable, because in the U.S. now and eventually around the world, demand for services is going to be growing faster than demand for goods (again in part because of increased labor productivity).

You serious? Our you imagine that people go home to their card-board boxes after work? Let's see, before telecommuting you have 1.) office, 2.) home. After telecommuting you have 1.) home. Sounds like a net decline in space, because ahem...the space that was previously unused during the day is now being used.

First, many telecommuters split time between the home and office anyway. Second, you are forgetting about home offices. We don't really know yet what will happen because telecommuting hasn't taken off, and may be more fundamentally limited than some originally imagined, but it is a fair bet that people working at home will end up buying/renting marginally larger residences.

I'm not talking about why firms cluster in cities in general. I'm talking about the fact that doing business in Pittsburgh is expensive relative to doing business outside of Pittsburgh.

My point is that there have always been higher costs to clustering in cities. So your latter fact doesn't represent a fundamental change.

With the exception of firms that want to be real close to the universities or service the local community, most start-ups in the area seem to go outside of the city.

It is true that many start-ups can't afford prime real estate early in their lifecycle.

Anyhow, Pittsburgh is not a desirable place to do business. Until that changes I really don't see how the city will do much beyond sustaining its current economy.

And yet the Pittsburgh economy has actually been growing in real terms and adding jobs. Since you predicted otherwise, one might think that would lead you to reconsider your assumptions about how desirable it is to do business in Pittsburgh.

[user_id]

Originally Posted by BrianTH

Shadyside and Squirrel Hill homeowners include not just faculty (less so staff) from the Universities, but also doctors from the hospitals, professionals who work Downtown, business owners, wealthy retirees, and so on.

Sure, but you are ignoring the conjunction. It is the fact that many people in the area don't have incomes that support the prices and that in the recent past they were considerably cheaper. None of the things you mentioned have changed over the last 8 years nor have the neighborhoods changed much. So why the jump in price? It just so happens...it jumped in priced during a national housing bubble. Gee....

Originally Posted by BrianTH

I don't think that is correct, actually. There has been steady appreciation all along,

These neighborhoods have appreciated pretty rapidly between around 2002~2007, the rate of appreciation back in the 90's was inline with inflation. I saw it with my own eyes, but also its pretty easy to see by looking at sale data from sites like zillow.com. Prices jumped from the early 2000's to around 2007, but that is not surprising. The easy credit, insane lending, etc was available in Pittsburgh just as well as other areas.

Originally Posted by BrianTH

but when you are talking about actual multiples in prices and not just small differences,

But we are not talking about "multiples in prices" that is just something you stated that is completely unfounded. Compare similar neighborhoods and similar quality houses and the prices are not "multiples". They are multiples in comparison to say NYC, LA, etc but those cities are dramatically different.

Originally Posted by BrianTH

I just think it is hard to deny that after controlling for other factors, housing prices in Pittsburgh are relatively low (not uniquely, though--there are a few other cities with equally if not cheaper housing).

I think its easy to deny this, if you control for the important factors, then housing prices in Pittsburgh are just what you'd expect them to be! Anything else, is "hidden gem" sort of thinking. Now, on an individual basis Pittsburgh could perhaps be a "hidden gem" because some of the negative factors could not be so negative to you.

Originally Posted by BrianTH

I don't know what "some degree of urban decay" means. If you are talking about things like lots of unkempt vacant lots and boarded up buildings, this isn't true in places like Shadyside and Squirrel Hill.

It most certainly is true in Shadyside and Squirrel Hill, you're either blind or never go into those communities. Even on Walnut there is an boarded up home right next to the supposedly "upper class" shopping area. But for those in Shadyside all you need to do is walk a few blocks up to Baum to see even more urban decay.

There are unkempt and vacant commercial lots in a number of places in Squirrell Hill (e.g., Forward ave). Many of the stores on Murray ave may as well be empty as they look like complete trash.

Originally Posted by BrianTH

I know, which is why housing is cheaper in Pittsburgh. But you seem to be resisting this straightforward explanation.

Obviously, Pittsburgh's home prices are lower than some areas because the supply exceeds the demand. But you are speaking as if this is the direct cause, and it is not. Why has the population declined? A number of reasons and those are real reasons why the house prices are lower.

Originally Posted by BrianTH

You seem to want to alternatively deny there really is cheap housing or explain it with other causes, but this is really a pretty straightforward situation.

No, I want to look at what variables are driving the prices down, not confuse direct and indirect causes as you are doing. Again why is the population declining? That is why there is an overstock of homes.

Originally Posted by BrianTH

I honestly have no idea why you would think Shadyside and Squirrel Hill are "run down",

Because they are? Both have some streets with rather nice homes, but most of these areas are pretty run down. By run down I mean, crappy looking store fronts, numberous homes that are unkempt, unkempt sidewalks and streets, etc.

Originally Posted by BrianTH

This should bode well for not just Pittsburgh but many post-industrial interior cities.

High property costs only bodes well for those that currently own property in the area.

People moved to the surburbs to avoid the costs of city housing, yet you think they are going to flock to the cities again because they now what to pay these costs.

Originally Posted by BrianTH

The problem with moving outward to cheap exurbs is that in addition to preferences shifting toward more urban living

I only see this preference in a relatively small demographic of people. Do you have any study that shows people have changed the preference in the aggregate?

Originally Posted by BrianTH

Accordingly, we have actually seen some of the greatest prices decreases and foreclosure rates in exurbs

The reason for this is obvious, these areas make up a bigger percentage of recent sales. Also, many of these communities were overbuilt during the housing bubble and now as a result the prices are declining to reach equilibrium with demand.

Originally Posted by BrianTH

We appear to have very different understandings of the facts. I know that automation allowed GM to produce the same amount of cars using a lot less factory space. I have seen this overall trend in manufacturing described many times.

As I said before, it is not generally true. I have no idea whether it was true of GM or not.

Originally Posted by BrianTH

I believe we exported something like $550 billion in services in 2008, with gave us a trade surplus in services of something like $144 billion.

I never stated we don't export any services. Most of the recent growth in the service sector has been a mere bubble and many of these service industries are going to have trouble exporting their services. Furthermore, key countries would like to domestically produce services they currently import.

My claim is that the service sector is too large in comparison to goods producing sector and growth in the service sector is likely to be weak for some time going forward.

Originally Posted by BrianTH

You are basically painting a picture of China not importing anything. Of course a smart China will not really try to eliminate imports, because that is bad for any economy in the long run.

China has to import raw materials, but besides that China (i.e., its government) would like to produce things domestically. Especially key items that it currently imports, like semi-conductors, etc.

The Chinese have different ideas about what is "bad for the economy in the long run", remember they don't buy into all of western free-market ideologies.

Originally Posted by BrianTH

Like what exactly? Not what they have said, but what they have actually done.

They stopped purchasing agencies, that is primarily why the FED has had to start purchasing them. They have greatly reduced the amount of long term treasuries they purchase, instead they are purchasing short term treasuries. There have been a number of changes during this financial crisis. China is pretty obviously looking to decouple from the US, the US was simply a pawn in their overall plan.

Originally Posted by BrianTH

OK, but something like 66% of U.S. personal consumption was of services in 2007, and this number has been slowly growing over time.

Yes and? Personal consumption as a percentage of GDP is too high, over the last 1-2 decades it was mostly fueled by growing household debt. The game is over, households need to delevarage and we need to produce more and consume less.

Originally Posted by BrianTH

We don't really know yet what will happen because telecommuting hasn't taken off

It has certainly "taken off", telecommunting has grown well beyond the increase in population over this decade. Regardless, telecommuting will reduce the amount of space required contrary to what you seemed to suggest.

Originally Posted by BrianTH

My point is that there have always been higher costs to clustering in cities. So your latter fact doesn't represent a fundamental change.

Its funny, because you only bring up things when it suits you. You've spent a good deal of time stating that the city limits are "just lines on a map" and now you are speaking otherwise. The city limits are what defines whether you pay city related taxes or not. So now, if it is cheaper to do business just outside of Pittsburgh and as you've stated many times the city limits are just "lines on a map" than why exactly would a business locate to the city vs outside of the city? If you say "clustering" than you are rejecting your previous notion of city-limits being just "lines on a map". You can't have it both ways.

Your sophistry leads me to believe you are trying to convince yourself of certain things...

Originally Posted by BrianTH

And yet the Pittsburgh economy has actually been growing in real terms and adding jobs. Since you predicted otherwise, one might think that would lead you to reconsider your assumptions about how desirable it is to do business in Pittsburgh.

I'm not sure what you are talking about, Pittsburgh has been losing jobs just like the rest of the country. Also, small movements in job growth don't really tell you much about how the city is for business. If for example the city's population increased, you could have an increase in economic activity (and job growth) with not a single new business in the area. Many businesses after all have no option but to do business in the city.

Also, you are distorting what I said. I stated that I don't suspect Pittsburgh to grow much until it addresses the fact that its not a good place to do business both in relation to areas within its metro area and other cities. I do suspect that Pittsburgh is close to finding a sort of equilibrium though, I would not be all that surprised to find in the 2010 census that Pittsburgth did not loss any population.

I've made no claims as to whether Pittsburgh is still losing population or not. I suspect it still may

[BrianTH]

Originally Posted by user_id

So why the jump in price? It just so happens...it jumped in priced during a national housing bubble. Gee....

We seem to have a different understanding of the facts. My understanding is that housing prices began increasing at a decent rate in places like Shadyside and Squirrel Hill in the mid-late 1990s, before the national housing bubble started. Meanwhile, although they were still increasing in the early-mid 2000s, they didn't spike as much as national prices in the 2004-2006 time period. So, the idea they tracked the housing bubble isn't really accurate.

I saw it with my own eyes, but also its pretty easy to see by looking at sale data from sites like zillow.com.

I'm looking at Zillow right now, and it is clear that Shadyside and Squirrel did not spike up in 2004-2006 like the rest of the nation (I can't find Zillow charts for before that time period).

Compare similar neighborhoods and similar quality houses and the prices are not "multiples".

I believe the numbers I gave before are roughly accurate.

Now, on an individual basis Pittsburgh could perhaps be a "hidden gem" because some of the negative factors could not be so negative to you.

The main factor keeping prices low is oversupply, and as long as you live in a neighborhood without a lot of vacancies it doesn't really effect you much.

Obviously, Pittsburgh's home prices are lower than some areas because the supply exceeds the demand. But you are speaking as if this is the direct cause, and it is not.

Of course it is a direct cause. Price is determined by supply and demand. This is basic economics. So if you have a relatively large supply, you will have relatively low prices. It really is that simple.

Why has the population declined?

A few key employers, mostly in the steel industry, dramatically contracted, and many people in a certain broad age cohort had to leave the area to look for work (thereby also taking their future children and grandchildren with them). Now there is no doubt that was a terrible experience for many people at the time, and there are still some echoing problems for some communities (including the City). But if you personally aren't looking for a job in the steel industry, it isn't so directly relevant anymore.

Both have some streets with rather nice homes, but most of these areas are pretty run down. By run down I mean, crappy looking store fronts, numberous homes that are unkempt, unkempt sidewalks and streets, etc.

I disagree with your aesthetic judgments, but there is little point arguing over something that subjective.

High property costs only bodes well for those that currently own property in the area.

But we won't get relatively high property costs versus most other cities until we are approaching capacity again in our central neighborhoods. And barring a really dramatic population boom (which hopefully we will avoid), that point is pretty far in the future.

People moved to the surburbs to avoid the costs of city housing, yet you think they are going to flock to the cities again because they now what to pay these costs.

People moved to the suburbs for a host of reasons, including: racial tensions as the Civil Rights Era-driven migration of black people to northern cities intersected with declining industrial jobs; negative cycles that further undermined central city amenities including schools and retail; some truly horrendours urban redevelopment decisions that made things worse not better, including underinvesting (and sometimes dismantling) public transportation and tearing up walkable neighborhoods to put in highways; variations on all this specifically related to crime; and so on. Meanwhile, people were also getting subsidies to make the move to the suburbs, such as in the form of artificially cheap gas and toll-free roads, buildout requirements for utilities including telecomms, and so on.

But all these terms are reversing: city economies are recovering again and racial tensions are easing at least somewhat; the negative cycles are turning into positive cycles and city amenities are improving; redevelopment people have gotten much smarter at providing the market with what it really wants in a sustainable way; urban crime rates are way down from their peak; and so on. Meanwhile, the subsidies of surburban life are collapsing: gas has gotten more expensive and even though it dropped from its pre-recession spike, it appears to have returned to a slower but steadily increasing trend in real terms; toll-free roads have reached their capacity limits and congestion is an ever-increasing problem; utilities are balking at build-out requirements with increasingly bad margins, and so on.

On top of all this, the underlying population is changing: as the baby boomers cycle into retirement, there will be more older childless people and also more younger childless people--in other words, households with children are going to go down as a percentage of the market, and people looking for convenient entertainment, cultural, and social options outside the home are going to go up. This is driving up demand for convenient walkable intergenerational neighborhoods with dense amenities and active social scenes.

So, to sum up, the relative benefits, the relative costs, and the underlying mix of market participants are all changing.

I only see this preference in a relatively small demographic of people. Do you have any study that shows people have changed the preference in the aggregate?

Demonstrating the current size of the preference is pretty easy. See, for example, here:

http://www.smartgrowthamerica.org/do...-SGASurvey.pdf

Showing there has been a change in preferences is harder because there haven't been (to my knowledge) any good surveys like this tracking over time. So you have to induce this change from consumer behavior and other similar sources, although I think in broader terms that shift is pretty obvious.

The reason for this is obvious, these areas make up a bigger percentage of recent sales. Also, many of these communities were overbuilt during the housing bubble and now as a result the prices are declining to reach equilibrium with demand.

Yes, but why did all this happen? In a nutshell, developers and speculators were predicting the extension of a trend in housing demand that proved unsustainable.

As I said before, it is not generally true.

I believe you are incorrect, but I guess we are at a standstill on this point.

Furthermore, key countries would like to domestically produce services they currently import.

And the same goes with goods. Countries only want to trade when it makes economic sense. This doesn't distinguish goods from services.

My claim is that the service sector is too large in comparison to goods producing sector and growth in the service sector is likely to be weak for some time going forward.

We'll see: I am willing to bet that over the long term, U.S. consumption will continue to slowly shift even more toward services.

The Chinese have different ideas about what is "bad for the economy in the long run", remember they don't buy into all of western free-market ideologies.

But they have to keep their economy rapidly growing or they will face riots that will eventually overwhelm the system. That sort of thing tends to trump ideology (or overcome it if necessary).

They stopped purchasing agencies, that is primarily why the FED has had to start purchasing them.

Everyone stopped buying agencies and shifted to Treasuries instead.

They have greatly reduced the amount of long term treasuries they purchase, instead they are purchasing short term treasuries.

That is the exact opposite of what they have been doing recently. In June, the latest month just reported, the Chinese sold short Treasuries and bought long.

The game is over, households need to delevarage and we need to produce more and consume less.

That logic applies equally well to goods versus services.

It has certainly "taken off", telecommunting has grown well beyond the increase in population over this decade.

Not nearly as much as people originally expected.

Regardless, telecommuting will reduce the amount of space required contrary to what you seemed to suggest.

There may be a marginal decrease.

Its funny, because you only bring up things when it suits you. You've spent a good deal of time stating that the city limits are "just lines on a map" and now you are speaking otherwise. The city limits are what defines whether you pay city related taxes or not. So now, if it is cheaper to do business just outside of Pittsburgh and as you've stated many times the city limits are just "lines on a map" than why exactly would a business locate to the city vs outside of the city? If you say "clustering" than you are rejecting your previous notion of city-limits being just "lines on a map". You can't have it both ways.

Actually, I would say the exact same thing: in terms of defining central business districts, the City limits are still just lines on the map--in this case, lines that are drawn too broadly, not too narrowly, meaning lots of what is inside the City isn't within one of the City's central business districts. To sum up, for CBD purposes the City limits are way too broad, for residential purposes they are way too narrow, and we could continue going through the list of possible purposes and probably never find a major area in which the City limits actually were particularly meaningful.

I'm not sure what you are talking about, Pittsburgh has been losing jobs just like the rest of the country.

I meant over the last few years prior to the recession. And during the recession, we have lost fewer jobs than the average.

If for example the city's population increased, you could have an increase in economic activity (and job growth) with not a single new business in the area.

But that wasn't what was happening in this case.

Also, you are distorting what I said. I stated that I don't suspect Pittsburgh to grow much until it addresses the fact that its not a good place to do business both in relation to areas within its metro area and other cities.

If you are talking about the City, I would just note that it appears the City has in fact been growing its business activity in real terms without growing its population. Whether you think that is "much" growth isn't really something I can address.

[user_id]

Originally Posted by BrianTH

We seem to have a different understanding of the facts. My understanding is that housing prices began increasing at a decent rate in places like Shadyside and Squirrel Hill in the mid-late 1990s, before the national housing bubble started.

The housing bubble started in many areas late 1990's, so whether it started in the late 1990's or early 2000's is not particularly relevant. From my on research on it, the prices seemed to start to jump at rates above inflation around 2001~2002. The housing bubble also peaked at different points in different areas depending on local dynamics. But the root cause was the same, namely easy money. That easy money was available in Pittsburgh just like everywhere else.

Some areas seemed to increase due to speculation, here I have in mind previously very cheap areas like Regent Square, Lawrence ville, South side, etc. I suppose in some sense the speculation could prove correct, but I see no evidence of that. I see a weakening real estate market and a huge supply of houses. The more upper class neighborhoods are built out and had less supply and I think these increased for the same reason they did in Los angeles, San Fransisco, etc Namely easy money and exotic lending.

Originally Posted by BrianTH

I'm looking at Zillow right now, and it is clear that Shadyside and Squirrel did not spike up in 2004-2006 like the rest of the nation

Huh? Nice strawman. I said "These neighborhoods have appreciated pretty rapidly between around 2002~2007". I said nothing about 2004~2006, nor did I claim that Pittsburgh followed exactly the national trend line. Rather I said, Pittsburgh had the same access to easy funds that everyone else did. This would have increased demand.

Originally Posted by BrianTH

I believe the numbers I gave before are roughly accurate.

I believe, you must have never visted the cities.

Originally Posted by BrianTH

The main factor keeping prices low is oversupply, and as long as you live in a neighborhood without a lot of vacancies it doesn't really effect you much.

Yeah, expect for the fact that Pittsburgh neighborhoods are rather small and its impossible not to be exposed to the run down nature of Pittsburgh on a daily basis.

Originally Posted by BrianTH

Of course it is a direct cause. Price is determined by supply and demand. This is basic economics.

The sentence you are quoting was ill-formed, the point is that the causal picture is more complex than just supply/demand. What caused the supply to increase, why did people leave for decades, etc.

In the case of housing the supply of homes just in Pittsburgh is not the only relevant factor to the price of the homes.

Originally Posted by BrianTH

A few key employers, mostly in the steel industry, dramatically contracted, and many people in a certain broad age cohort had to leave the area to look for work

This explanation is about as surface as it gets. Yes, the steel industry contracted. But it contracted over a fairly long period of time, why did Pittsburgh fail to pick up jobs in other sectors that were replacing the steel jobs? Could it be....perhaps the same cronyism and poor business environment that exists today? Pittsburgh has changed little, just replace the steel industry with health care.

Originally Posted by BrianTH

But we won't get relatively high property costs versus most other cities until we are approaching capacity again in our central neighborhoods.

Many central neighborhoods are already at capacity, these will just increase in price. The other neighborhoods will increase in price too though, as some demand obviously commands a higher price than no demand.

Originally Posted by BrianTH

But all these terms are reversing.....

The most important issue is not reversing, land in cities is far more expensive than land outside of cities. Businesses have to have strong reasons to do business within cities and people likewise have to have strong reasons to pay dramatically more for housing.

Contrary to your vision of matters, businesses are not moving into big cities they are building factories in suburbs and smaller communities.

You seem to not detach speculation from reality, these things have yet to occur and there is not much evidence that they are occurring. There is certainly speculation about it, but whether the speculation proves correct is an open question.

Tell me in 1-2 decades whether the "terms are reversing".

Originally Posted by BrianTH

cultural, and social options outside the home are going to go up. This is driving up demand for convenient walkable intergenerational neighborhoods with dense amenities and active social scenes.

It is? Demonstrated it....seems like half baked speculation to me.

Originally Posted by BrianTH

Showing there has been a change in preferences is harder because there haven't been (to my knowledge) any good surveys like this tracking over time.

In other words you make statements of fact from your speculation...got it. Hoping that "investment" pays off eh?

Originally Posted by BrianTH

Yes, but why did all this happen? In a nutshell, developers and speculators were predicting the extension of a trend in housing demand that proved unsustainable.

This is not accurate. The areas were over built due to half-baked speculation. They were not tracking any trends, they were building far more rapidly than they have in the past. The builders failed to distinguish between actual depend and depend from speculation (e.g, flippers).

You are trying to use this as evidence for your "return to the urban" speculation, but it does not support it at all. In fact despite the meltdown in these areas, they are still some of the fastest growing areas in the country.

Originally Posted by BrianTH

But they have to keep their economy rapidly growing or they will face riots that will eventually overwhelm the system.

Sure, they will stimulate domestic demand which has a lot of room for growth.

Originally Posted by BrianTH

Everyone stopped buying agencies and shifted to Treasuries instead.

Which does not change the fact that the Chinese shifted away from them. The FED can support these markets forever and foreign players are not going to jump back into them....oh wait that means interest rates will increase which will further reduce house prices.

Originally Posted by BrianTH

There may be a marginal decrease.

Oh please....the net decrease in space required is huge. Not sure what is so hard about this....before telecommuting you needed an office after you don't.

Originally Posted by BrianTH

Actually, I would say the exact same thing: in terms of defining central business districts, the City limits are still just lines on the map--

Oh yes of course, tell me about the "central business districts" outside of Pittsburgh's city limits or hell...outside of the triangle. Pittsburgh's city-limits in most areas extend well beyond its business districts.

To me the city limits are only important in so much as they define which gang you have to pay up to. The urban core is in the triangle, the areas outside of the triangle are largely suburb (and in some cases almost rural) despite being within the city-limits. With the possible exception of some of the east end, few people are going to work in an area outside of the city yet live within the city, especially its central neighborhoods which will be fairly far. You talk about clustering, but ignore it.

In terms of all this "raise of the urban" talk, Pittsburgh is hardly urban. There are only two urban areas, Oakland and Downtown the rest is suburban or rural. What is a "suburb" to Pittsbughers is a one horse town to people that live in the NYC, LA, etc areas.

Originally Posted by BrianTH

And during the recession, we have lost fewer jobs than the average.

Sure because Pittsburgh is highly dependent on education and health care which tend to be recession proof. This says little about the strength of its local economy.

[user_id]

Anyhow, the back and forth is getting boring. My general claim about the city is that its likely done declining in population (and economic) terms once you account for the recession, but will have very limited growth. Any growth observed is likely to be due to natural growth of its current industries rather than attracting new businesses and industries. In other words, Pittsburgh is likely to be pretty much the same in 1-2 decades as it is today and that would include its historically lackluster real estate markets.

You are free to disagree, just don't state your speculation on future societal trends as facts.

[BrianTH]

Originally Posted by user_id

You are free to disagree, just don't state your speculation on future societal trends as facts.

I think there is ample evidence of these trends already having started (in some cases for decades). But we shall see.

[SewickleyPA]

Originally Posted by user_id

Anyhow, the back and forth is getting boring. My general claim about the city is that its likely done declining in population (and economic) terms once you account for the recession, but will have very limited growth. Any growth observed is likely to be due to natural growth of its current industries rather than attracting new businesses and industries. In other words, Pittsburgh is likely to be pretty much the same in 1-2 decades as it is today and that would include its historically lackluster real estate markets.

You are free to disagree, just don't state your speculation on future societal trends as facts.

By all means, let's not let any facts get in the way of your opinions.

Using current trends based on actual evidence proves that Pittsburgh will in fact not be the same in 1-2 decades. This is even excluding any future societal trends which you apparently are vehemently against.

It appears to me that you are over-emphasizing the negatives of the political scene in the city. Yeah there is cronyism and some anti-development crap still going on, but that has been changing at an increasing pace over the last decade. I don't even live in the city and can see the changes taking place each week.The fact that you are ignoring these trends to make it seem like Pittsburgh will be stuck in a "twilight zone" of slow progress, population decline, and prolific urban decay for decades is simply inaccurate and laughable.

You seem to think that everything is just going to level off due to the recession and never pick back up again. I have reason to believe that you won't be putting your hard earned money where your mouth is on this one. I hope you are not putting yourself through the pain of living here while possessing this "yinzer-like" glass is half empty attitude. By all means move to where the grass is greener, in your opinion, and let us all deal with the wave of progressive ideas that are gaining in momentum throughout the city.

Change occurs when a critical mass of progressive people come together and decide to take action. You can see this happening all over the city, this recession is nothing more than a proverbial speed bump in the ongoing upward curve.

Also, please stop comparing Pittsburgh to cities like Denver, and Portland. The latter cities are so different in so many ways with Pittsburgh that it outright invalidates any comparisons made between them. Try comparing Pittsburgh with cities of similar geographical, economic, and political characteristics, such as other cities in the rust belt. Heck, even the cities on the east coast make for better comparisons.

[user_id]

Originally Posted by SewickleyPA

Using current trends based on actual evidence proves that Pittsburgh will in fact not be the same in 1-2 decades. This is even excluding any future societal trends which you apparently are vehemently against.

I'm not sure which trends you have in mind, the city has been declining in population for decades and has been decaying for decades. There has been some recent development, but how much of that was part of the speculative real estate boom of this decade?

Originally Posted by SewickleyPA

It appears to me that you are over-emphasizing the negatives of the political scene in the city. Yeah there is cronyism and some anti-development crap still going on, but that has been changing at an increasing pace over the last decade.

I'm not over-emphasizing it at all, I'm just speaking from a small business perspective. This is not, at least directly, relevant for people working 9-5's.

Originally Posted by SewickleyPA

The fact that you are ignoring these trends to make it seem like Pittsburgh will be stuck in a "twilight zone" of slow progress, population decline, and prolific urban decay for decades is simply inaccurate and laughable.

Again, the trend has been declining population and a decaying city and metro area. Some new shiny speculative real estate developments do not impress me much, especially when they were highly leveraged with easy money.

What I'm suggesting for Pittsburgh is more of the same, I don't think that is too outlandish. I think the area is close to equilibrium in terms of population decline though, I think current industry is enough to support the current population with perhaps modest growth going forward.

Originally Posted by SewickleyPA

By all means move to where the grass is greener, in your opinion, and let us all deal with the wave of progressive ideas that are gaining in momentum throughout the city.

I have already moved, I'm no longer in the area.

Originally Posted by SewickleyPA

Change occurs when a critical mass of progressive people come together and decide to take action. You can see this happening all over the city, this recession is nothing more than a proverbial speed bump in the ongoing upward curve.

I really don't know what "progressive people" are, what makes areas grow is business activity not people "taking action". In fact the current establishment (including its current residents) is unlikely to favor policies that would not drive business growth, rather they will favor policies that line their pockets.

Building a bunch of crap in Pittsburgh is not likely to increase business activity beyond that generated by the building. Pittsburgh needs to be an attractive place to do business and its not, especially for start-ups and small businesses.

Originally Posted by SewickleyPA

Also, please stop comparing Pittsburgh to cities like Denver, and Portland. The latter cities are so different in so many ways with Pittsburgh that it outright invalidates any comparisons made between them. Try comparing Pittsburgh with cities of similar geographical, economic, and political characteristics, such as other cities in the rust belt. Heck, even the cities on the east coast make for better comparisons.

You're telling this to the wrong person. I have tried to argue that Pittsburgh is not comparable to these cities despite having similar sized metro areas.