Why are the values of homes in the suburbs/urban areas of Pittsburgh the inverse of other cities? (Montgomery: rent, condo)

[Hopes]

Originally Posted by Fiddlehead

...but I believe that game has played out in both the short and long-term.

Played out for certain. The only people who benefited were those who got in on the bottom. There is something to be said for a steady economy with slower real estate growth. If you plan to live in your house for a lifetime, as most Pittsburghers do, your house will definitely appreciate for retirement. Sure it will be smaller, but it's more of a guarantee because where there's a boom there will eventually be a bust. Look at those poor souls who have mortgages higher than the value of their homes. Some retirement money from real estate appreciation is certainly better than nothing.

[Fiddlehead]

Originally Posted by Hopes

Played out for certain. The only people who benefited were those who got in on the bottom. There is something to be said for a steady economy with slower real estate growth. If you plan to live in your house for a lifetime, as most Pittsburghers do, your house will definitely appreciate for retirement. Sure it will be smaller, but it's more of a guarantee because where there's a boom there will eventually be a bust. Look at those poor souls who have mortgages higher than the value of their homes. Some retirement money from real estate appreciation is certainly better than nothing.

You are right that it did turn our culture into the "haves" and many more "have nots." That is why I was emphasizing in a previous thread about the middle class muddle. I share your empathy for the poor folks who were victims of the game. One example, a former employee of mine commuted from the Willamette Valley to S. Oregon for 3 years. He could not afford S. Oregon, and he owned two older homes in a depressed logging town in NW Oregon. One was a historic farmhouse he was renovating over many years. 50 year old bachelor. He met a woman, sold the two homes for about $250k total and took a position in Las Vegas, and bought a $400k home in FALL 2005! Fast forward three years, he hates his new job, gets the big C (non terminal,but...), housing crashed, and unfortunately they cannot move without losing a lifetime of savings. A lost cause, because that home is not going back up to $400k anytime on the next decade or longer. So, the sad tales do exist....and a doubly raw deal for not so young newlyweds...!

However, I believe the more common story was someone who bought more than they could afford,thinking they were getting "gold mine," or, worse yet, someone, who tapped into their equity to put money down to flip houses. There were hundreds of thousands who pocketed hundreds of thousands at this game, but millions, indeed the globally economy that paid the bill. The problem is, other than my old friend, I suspect very few would hold on to a house they are struggling to pay for and is worth $100k less than the loan. Mail in the keys and take the credit score hit..

Good news is, that has been done, so not likely to recur in our lifetimes...I hope.

[Fiddlehead]

I guess to try to tie this thread back the Pittsburgh pattern, I would suggest that if a "land rush" ever starts in the city, avoid those neighborhoods like the plague. Anything with more than 6-8% appreciation three years running is probably bogus, unless wages are doing the same. There is no such thing as a "perpetual equity machine."

[Drover]

Originally Posted by Fiddlehead

Point I would would make is that the old rules were to work in a terrible place and overpay, or crowd into an elite hipster paradise and overpay. Either way, appreciation would give you a huge boost at retirement. That certainly was very true out here in the West, but I believe that game has played out in both the short and long-term.

I sure hope to Christ it's played out. It's been frustrating watching the bottom rung of the home ownership ladder get pulled out of reach far faster than I could build up the means to reach it. Of course now that housing prices are almost kinda sorta coming back down to reality, it seems no lender will touch you with less than 20% down.

[Tiger Beer]

Originally Posted by Drover

I sure hope to Christ it's played out. It's been frustrating watching the bottom rung of the home ownership ladder get pulled out of reach far faster than I could build up the means to reach it. Of course now that housing prices are almost kinda sorta coming back down to reality, it seems no lender will touch you with less than 20% down.

Which is actually GREAT....because it'll force people to price their houses appropriately.

[BrianTH]

Originally Posted by Fiddlehead

I guess to try to tie this thread back the Pittsburgh pattern, I would suggest that if a "land rush" ever starts in the city, avoid those neighborhoods like the plague. Anything with more than 6-8% appreciation three years running is probably bogus, unless wages are doing the same. There is no such thing as a "perpetual equity machine."

I would actually qualify this warning a bit. We've got some economically depressed, relatively high-vacancy, and yet centrally-located neighborhoods where fundamentally solid housing is still really cheap even by Pittsburgh standards. If and when one of these neighborhoods start redeveloping and repopulating, it will likely go through a period of a few years of abnormal appreciation.

Now it is absolutely true that would necessarily be a temporary phase, so people shouldn't buy there with the expectation that those same appreciation rates will continue. However, if you want to buy there because you want to live there, and the price seems fair in comparison to other similar Pittsburgh neighborhoods, I wouldn't tell a person not to do it. And that is because that initial abnormal appreciation effect is not necessarily the result of neighborhood pricing outstripping the local wage base, but rather can just be the result of neighborhood pricing reflecting an increasing local wage base.

That said, it is true that if things in Pittsburgh really take off, you could start seeing speculative pricing that may lead to future busts, at least on a localized basis. The warning signs would hopefully be familiar at this point: in addition to rapid appreciation, things like highly leveraged investments by both businesses and individuals, rapid turnover (aka "flipping"), rising vacancies among new/renovated properties, and so on.

And in fact I would still say in such a situation you may be OK buying where you want to live at a price you can afford. But you really then need to be quite sure that is what you are doing, and to be prepared to stay around for quite a while in case prices do crash.

[smokecitytdi]

Originally Posted by ScranBarre

Why do you think I (and some of my fresh college graduate peers) are now seriously looking into Pittsburgh for relocation? At age 22 I'm earning a $42,000 salary in the Metropolitan Washington, DC area and can only barely afford a 1-BR apartment in a sterile suburb a half-hour west of the District. Even if I were earning a $100,000 salary with my MBA and CPA I still couldn't afford a home here. I just don't see the "upshot" of living here long-term and putting up with the heinous traffic congestion, horrible urban sprawl (that the people here actually "like"), and noticeable dearth of charm, soul, or character in most fake-feeling neighborhoods and our chain restaurant-dominated "town centers" if I'll never be able to afford anything better than a suburban apartment.

In Pittsburgh I can easily afford my dream 2 BR, 1 BA, 1,100-square-foot old rowhome in the Mexican War Streets or a similarly-sized bungalow in Mt. Washington, even with a lower salary. The upside? I am also able to walk or take a bus to mostly everything I need from sporting events to museums to shopping, dining, nightlife, parks, and employment centers. I actually don't understand why people would want to live in a place like Cranberry Township when the level of charm Pittsburgh has is unrivaled.

It's juts a no-brainer to me. Nobody can ever give me a good reason to love living in Reston, Virginia other than "there's good jobs" (there's also jobs in my field in Pittsburgh), and "you're near a great city" (Pittsburgh has all of the amenities of a city twice its size with half the crowds to knock over). What good is an $80,000 salary in DC if you are living frugally whereas a $60,000 salary in Pittsburgh permits you to live comfortably? Seriously. What gives? Why is DC the "Best Place for Young Hip Singles" instead of Pittsburgh?

15 years ago I moved to Pittsburgh and left I270 for the better (cheaper) life in Pittsburgh.
After 15 years my salary is in the mid-50's while my friends in DC or any growing metro areas are more than double. The salary isn't the whole story in Pittsburgh. Due to the job market in Pittsburgh the employees are managed different than in the DC metro area. As an employee, (most) people are managed as an asset in the DC area. Companies really don't want to lose a good asset. (Cost of training, or experience) Unlike DC the Pittsburgh management style is the same Henry Clay Frick used from the early 1900's, The machines are worth more than the people. Henry Clay Frick - Wikipedia, the free encyclopedia The attitude here is, I'm sure we can find someone more qualified (from DC) and we will pay them less than you. This attitude keeps the benefits and salary's low (unless your in a union), which in turn makes the workers miserable. Look at the best companies to work for list. How many do you see in Western Pa? http://www.bestplacestoworkinpa.com/docs/Best_Places_to_Work_in_PA_2009_Winners_Alphabetize d.pdf (broken link)

Yes I bought my home for half of what they sell for in Maryland but I am unable to make any profit since the appreciation is slower than the cost of repairs.

Stay in DC.

[Hopes]

Originally Posted by smokecitytdi

Yes I bought my home for half of what they sell for in Maryland but I am unable to make any profit since the appreciation is slower than the cost of repairs.

Things could be worse for you. My girlfriend's house in Maryland is worth 200k less than her mortgage.

[BrianTH]

On the whole, salaries in Pittsburgh for comparable jobs are not a mere 50% of what they would be in DC. So it can't be true that everyone ends following the same career path as smokecitytdi when it comes to relative salaries, and too few people are union (even in Pittsburgh) for that to be the whole explanation.

[smokecitytdi]

Originally Posted by Hopes

Things could be worse for you. My girlfriend's house in Maryland is worth 200k less than her mortgage.

I looked at a split-level 4 bd. home in Montgomery Co. just before I moved 15 years ago. The asking price was 220k. The homes sell for over 500k in the same area now. I would be "up" at least 300k even with the market setback. If I get some new windows next year I will have more in my house than I can sell it for in Pittsburgh... after 15 years of ownership.

Your friend had very bad timing.