Pittsburgh Housing: Cheaper to Own than Rent (Denver: fit in, transplants)

[Hopes]

We've always know that it's cheaper to own property in Pittsburgh than rent it. It's always been that way. As a result, I was surprised to learn in an article today that in many areas of the country it's cheaper to rent than own.

I can't imagine that changing here either. If our economy and housing market boomed, rental property would become limited and landlords would continue to increase rent accordingly. That's my theory.

A few months ago, I helped someone moving here from the Boston suburbs look for a rental here. She was surprised to discover that our hosue rental prices are the same or higher than where she lived in Boston. And housing prices are extremely expensive in the Boston market compared to Pittsburgh!

So, why is Pittsburgh different? Why is rent so high here?



FYI, this is the article: Why Rent When You Can Buy? - BusinessWeek

(My comments aren't really based off the article. It merely inspired my thoughts.)

[BrianTH]

As an aside, that BusinessWeek article appears to be omitting the opportunity costs of any capital invested and is just looking at monthly cash flows. They also probably got property taxes and maintenance too low in Pittsburgh.

But in any event, generally the cost to own versus the cost to rent should never get too far out of line because of the ability of property owners/developers to shift from sellers to landlords or vice-versa in order to maximize their returns. So, it was indeed a sign of something going wrong in some of these market when buying had become a lot more expensive than renting, and that something was bound to prove unsustainable.

[pman]

Originally Posted by Hopes

We've always know that it's cheaper to own property in Pittsburgh than rent it. It's always been that way. As a result, I was surprised to learn in an article today that in many areas of the country it's cheaper to rent than own.

It's a patently false statement to say it's always cheaper to own than rent, it was just such unfounded sentiments that led to the property boom in the first place.

Originally Posted by Hopes

I can't imagine that changing here either. If our economy and housing market boomed, rental property would become limited and landlords would continue to increase rent accordingly. That's my theory.

renters are price takers, if rents increase too much, people will move, or buy to lock in a price...which drives up the price of homes and reduces the pool of renters. when the price of homes and rents go up without regard to income, it's inflation.

Originally Posted by Hopes

A few months ago, I helped someone moving here from the Boston suburbs look for a rental here. She was surprised to discover that our hosue rental prices are the same or higher than where she lived in Boston. And housing prices are extremely expensive in the Boston market compared to Pittsburgh!

you are correct, it may be because there are far more rentals in boston. OTOH, apartment rentals in Pittsburgh are far, far cheaper than boston...esp considering the quality of some apartments in boston. a buddy of mine had a $1400/mo apt in the north end, 2 BR's. It was old, bedrooms were tiny, fifth floor walkup, the water heater was in the middle of the living area, the kichen was four cabinets and a sink, and a dishwasher, in the living area. this was 8 years ago

Originally Posted by Hopes

So, why is Pittsburgh different? Why is rent so high here?

my own comparison shows it cheaper than Philly (which, in turn is cheaper than boston). And even if I'm renting at the same price, what puts me in a smaller walkup in Philly puts me in a nice, spacious apartment in Pittsburgh. that said, I'd say the Pittsburgh rental market is slightly underdeveloped

Pittsburgh isn't exempt from the basic rules, though it was somewhat exempt from the last boom/bust. In the end, no place is exempt from supply and demand, even if, in the short term, people become convinced it is.

[skrizzle]

I Have been looking at rental prices, and it seems extremely cheap compared to KC to rent a house. But I don't know if the areas are decent or anything else....

[highway29south]

I have to agree. My brother will be done with his 20 in the Navy next year and will be moving to Pittsburgh. While he was home on leave last week, we looked into rentals compared to housing prices. It was about the same. Now that doesn't include taxes on the houses, which I always estimate to be an additional $200 a month, if not more. But it still seems much smarter to do the buying route than rent, esp. for what you get for the price.

[BrianTH]

In an equilibrium market, usually the tradeoff between renting and buying is a matter of time (assuming typical financing, a typical tax situation, and so on). The flipover point tends to be around 4-5 years, meaning if you plan to be in the place less time than that it will be better to rent, and more than that it will be better to buy. All this is subject to variation based on personal circumstances, of course (for example, people with very high incomes sometimes prefer to rent most if not all of their residential properties, basically because they aren't getting a tax break on financing whereas their landlords can keep writing off their financing costs).

[pman]

Originally Posted by BrianTH

In an equilibrium market, usually the tradeoff between renting and buying is a matter of time (assuming typical financing, a typical tax situation, and so on). The flipover point tends to be around 4-5 years, meaning if you plan to be in the place less time than that it will be better to rent, and more than that it will be better to buy. All this is subject to variation based on personal circumstances, of course (for example, people with very high incomes sometimes prefer to rent most if not all of their residential properties, basically because they aren't getting a tax break on financing whereas their landlords can keep writing off their financing costs).

it seems to me that the MID actually benefits wealthier people a lot more than anyone else. it's a regressive tax, specifically, that the size of the benefit increases with the price of the home.

[BrianTH]

Originally Posted by pman

it seems to me that the MID actually benefits wealthier people a lot more than anyone else. it's a regressive tax, specifically, that the size of the benefit increases with the price of the home.

That is true, but only up to a point. First, it is only good on a first or second home. Second, it is only good for up to $1 million in debt. Now for most people, that is adequate. But if you are wealthy enough (and by this I mean quite wealthy), you might find it covers only a small portion of what it would take to finance your residences.

[ryanswindle]

A lot of stuff here not really referencing the point that the OP was asking about.

I noticed the same thing when I moved here from Denver, it's cheaper to rent here, but even cheaper to buy, in Denver rent is a little more, but housing is way more and considerably more expensive than rent.

My guess as to why renting is more expensive here than buying is because the Pittsburgh metro area has been (slowly) losing population driving down the cost to own permanently, whereas rentals support a different market - temporary residents. Population statistics in Pittsburgh could point to growth in temporary residents with loss of permanent residents.

Also it may just be that they need to charge more to support there margins with a dwindling population. Another possibility could be the lack of new growth in temporary residences in the Pittsburgh metro area creating little competition for the few somewhat nice apartment complexes, allowing them to monopolize a bit.

The traffic is particularly terrible around Pittsburgh due to the topography, this may drive up the value of temporary residences with particularly good locations, while location is a less affective factor in permanent residency. Permanent residents would tend to focus more on getting the house they want, with location as a secondary priority.

These are just possible reasons that I thought up to explain the phenomenon which I noticed as well upon moving here..

[aaronibus62]

Originally Posted by pman

It's a patently false statement to say it's always cheaper to own than rent, it was just such unfounded sentiments that led to the property boom in the first place.

renters are price takers, if rents increase too much, people will move, or buy to lock in a price...which drives up the price of homes and reduces the pool of renters. when the price of homes and rents go up without regard to income, it's inflation.

you are correct, it may be because there are far more rentals in boston. OTOH, apartment rentals in Pittsburgh are far, far cheaper than boston...esp considering the quality of some apartments in boston. a buddy of mine had a $1400/mo apt in the north end, 2 BR's. It was old, bedrooms were tiny, fifth floor walkup, the water heater was in the middle of the living area, the kichen was four cabinets and a sink, and a dishwasher, in the living area. this was 8 years ago.

Pman, if you mean there are more apartment rentals here, yes, there are.

As for houses, no and the few rare houses I've seen available for rent here
in Brockton, a city of approx. 93,000 some 21 miles south of Boston, rents are $1700-2000+, way too much.

Also, those offering houses for rent are looking for renters who can turn into buyers within a year or so, not letting buying a take-it or leave-it option.

Because there are generally no houses available here for rent, and the terms are unreasonable, my wife and I hope to relocate to Pittsburgh in a year or two. We'd be happier renting a house for $1000 or less a month than renting
an 850 sq. ft. apartment here that badly needs fixing up and has seasonal problems with carpenter ants and mice!

Hope to join you all, including my fellow wannabe transplants, soon