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You can take my basic premise of people being priced out of the East End and improving other neighborhoods and apply it to a national level. Part of the reason that Pittsburgh is experiencing its current renaissance is due to expensive housing in NYC, SF, DC, etc. If Pittsburgh ever reaches those levels, then some other cities will take its place as the place for bargain home ownership. But note that we are a long way from San Francisco or NYC housing situation.
Yep. I doubt that Pittsburgh will ever reach SF or NYC levels or even the level it was at in its heyday in the 50s until the exodus of the steel industry. I do think it will grow and appreciate at a steady pace and there will be fewer decimated neighborhoods than there are now. This is what happens when the economy stabilizes and grows.
More to the point of Brookline, owning a house in an appreciating neighborhood means you can now make all the upgrades to your home that you wanted to make before but couldn't justify the cost of. Kind of what Der Schwabe said.
You're right. Houses have to have a certain level of value before it's worthwhile to spend money on improvements beyond basic upkeep.
NYC and San Francisco weren't always "exclusively for the elite". They became that way due to generations of people greedily flipping homes for successively greater and greater variances above the median household income in these areas at the time of sale. Now that's why someone even earning $100,000, far above the median household income in San Francisco to begin with, can't even afford to buy a home proximate to work without sponging off parents.
I can't speak for NYC, but I can speak about SF. It was always an expensive city, just not stratospheric like it is now. Most of its close-in suburbs were pricey too, but not stratospheric like they are now. And there have been highs and lows. For example, the housing market took a big dive soon after the Loma Prieta earthquake in '89, after the dot-com bust around 1999, and in the market crash in 2007 (albeit, in 2007 mostly in the exurbs). A few years later the market came roaring back because there is virtually nowhere left to build in the entire Bay Area, the weather is awesome, there are major universities and hospitals, it is headquarters for many of the premier corporations in the world, the Napa Valley, Monterey Bay, Tahoe, Yosemite are all close by… It will never be an inexpensive place to live.
Pittsburgh has many neighborhoods that are safe and affordable, it has dirt cheap neighborhoods that are iffy, and there are many buildable vacant lots. It does not have sprawling exurbs far outside the sprawling suburbs. You don't have to go very far outside the city limits before you're in rural areas. It has many nearby depressed small towns. It will take generations, if ever, before the area could possibly be anything like SF or NYC. I think the safer untrendy neighborhoods like Brookline are likely to see strong appreciation. that will cause what are now iffy neighborhoods to improve. That said, there will be ups and downs along the way. I am in my late 50s and for my entire life people were predicting that SF's Mission district and other sketchy neighborhoods would improve. They improved very gradually in fits and starts until recently when they took off. It took unheard of appreciation, essentially becoming the most expensive city in the US, for them to be the kind of place where Mark Zuckerberg buys a home. I cannot see that kind of market craziness ever happening in Pittsburgh.
Again, I think you're confusing appreciation that comes with a functioning economy with a housing crisis.
I personally use these metrics for pricing our neighborhoods:
ONE EXTREME: If the median sales price of homes in a neighborhood surpasses thrice the median household income for both the city AND that neighborhood, then the neighborhood is in danger of becoming "overpriced", as most city residents will not be able to afford a home there, AND typical neighborhood residents may no longer be able to afford to buy homes in their own neighborhood. The pool of potential buyers will shrink to the point where housing prices will need to come down a bit to attract buyers.
If the median sales price of homes in a neighborhood surpasses thrice the median household income for the city while still being around thrice the median household income of the neighborhood, then the neighborhood is "expensive" by city standards while still being stable because neighborhood residents can typically still afford to buy there, even if residents of most other city neighborhoods can't. Home prices rising in this scenario would make the neighborhood risk becoming "overpriced".
If the median sales price of homes in a neighborhood is less than thrice the median household income for that neighborhood while still being greater than thrice the median household income of the city, then the neighborhood is a "bargain" because someone earning the median household income in that neighborhood is not having to shop at the top of their approved budget to afford a home in their neighborhood while most city residents still can't afford to buy there. There is room for market correction steering this prices upwards a bit.
OTHER EXTREME: If the median sales price of homes in a neighborhood is less than thrice the median household income for both that particular neighborhood AND the city overall, then the neighborhood is "underpriced" because neither neighborhood residents nor city residents at-large have to shop at the top of their approved budgets to buy a home there. There is ample room for moderate market correction pushing pricing upwards.
Why do I care about this? I don't ever want to see the day arise when the majority of Pittsburgh's neighborhoods have median sales prices that exceed thrice the median household income of the city because then the majority of the city will officially be "unaffordable" to the middle-class. My concern is that the number of neighborhoods in the "unaffordable" category has increased just from 2010 to 2014, and there will undoubtedly be more added to this list in the coming years. One of Pittsburgh's greatest strengths has consisently been "housing affordability". Many have been moving here in recent years because unlike DC/NoVA, NYC, S.F., L.A., etc. one can enjoy the urban experience here, earn the median household income here, and comfortably afford to buy a modest home here. When we lose that edge, we will be taking a big hit psychologically. We're certainly not there yet, but if left unchecked we WILL become "unaffordable" in another generation or two given current trends of housing sales prices rising more rapidly than real wage growth.
I wouldn't mind if the median sales price for a home in "XYZ Neighborhood" went from $102,000 in 2010 to $150,000 in 2015 if the median household income in that neighborhood likewise rose from $34,000 in 2010 (1/3 of $102,000) to $50,000 in 2015 (1/3 of $150,000). By-and-large that has NOT been happening in this city, though, where many neighborhoods HAVE been seeing their median sales prices rising far more rapidly than the rise in median household incomes, pricing more and more middle-class people out of the market.
Those of you who already own homes don't care, obviously. I shouldn't really "need" to care since I'll be buying a home before this bubble hits. I do worry about future generations, though. Don't any of you? What do 20-somethings and 30-somethings in NYC or L.A. do to afford their first home these days? Even if they're making $100,000 per year working as a software engineer at Google or something the median sales price of homes in these areas FAR exceeds $300,000. Do they all mooch and sponge off their parents like trust fund hipsters? Is that the future we want for Pittsburgh? A future generation that can't make it on their own without relying on their parents' pocketbooks?
Are you aware of any basic economics? Supply and demand? The market sets the price for a house. It works that way in every market in every free country in the world, whether you approve or not. If no one can afford to buy houses, the prices come down until houses begin selling again. Sorry, that's the way it works. Prices rise as long as there is a market that can afford them.
So very few young people 'mooch' off their parents because so very few people are rich enough to give their kids that kind of money, nor do they want to. Young people do the same thing that everyone has always done, they work hard, save money, and by the starter home that they can afford. I never 'mooched' off anyone, but saved money and bought a very small home when I was 30. Saved again, sold the first house at the current market value, and bought a bigger house. Everyone I know did the same thing because 99% of us didn't have rich parents. I'd be shocked if over 1 or 2% people in Pittsburgh who buy houses are 'mooching' off of anyone.
You're right. Houses have to have a certain level of value before it's worthwhile to spend money on improvements beyond basic upkeep.
Exactly! Why would anyone invest in a house if they didn't expect some return on their money? It would just be a money pit if it didn't increase in value. It would be silly to invest in a house when renting would be cheaper and without any hassles. And since no one would invest in houses, nor more houses would be built.
Investing in cars is not the same as investing in houses. Cars last 10-15 years, houses can last hundreds of years. Most people have to buy cars, they don't have to buy a house, ever. They can rent. Without houses being a good investment, people wouldn't invest in building them. That would make existing houses even more expensive. You know, that pesky ol' supply and demand. More demand, and lower supply, makes things more expensive. That's why diamonds are expensive, and dirt isn't. duh. Basic economics.
Exactly! Why would anyone invest in a house if they didn't expect some return on their money? It would just be a money pit if it didn't increase in value. It would be silly to invest in a house when renting would be cheaper and without any hassles. And since no one would invest in houses, nor more houses would be built.
This is a little off base. Renting is often cheaper when comparing like items. Maybe slightly less true in this area with a bit tighter rental supply. Buying a house should not be seen as an investment as the main goal. It is a choice in housing, and the investment bit is secondary. There are still many reasons to choose buying a house over renting even if no appreciation of the house value happens. But, I stop well short of saying appreciation should be forced not to happen. That definitely would suppress buying somewhat, even if everyone treated appreciation as secondary. It would have wide-reaching impact in the real estate and construction arenas, and not in a good way that I can see.
In my house, even considering the maintenance items that I've done, the cost is fairly reasonable for what it is. It appears I may stand to gain a bit of appreciation in selling, but even if not, it would still not be a money pit.
Housing, especially single-family houses, follows a very fixed supply and demand rule. The simple fact is LAND supply only goes down. and when talking of buying a house in a certain area, that is the constraint. If more and more people want to be in that area, they will pay more and more for the same house. You can get much higher housing density with multi-unit buildings, but that's not the same as a house. The only way the land value goes down is the area becoming less popular. There are probably places where one could find land and housing that would be essentially fixed in price because the supply is not exhausted and demand isn't increasing. They might not be totally undesirable, but by definition they wouldn't be very desirable.
Quote:
Originally Posted by LillyJo
Investing in cars is not the same as investing in houses. Cars last 10-15 years, houses can last hundreds of years. Most people have to buy cars, they don't have to buy a house, ever. They can rent. Without houses being a good investment, people wouldn't invest in building them. That would make existing houses even more expensive. You know, that pesky ol' supply and demand. More demand, and lower supply, makes things more expensive. That's why diamonds are expensive, and dirt isn't. duh. Basic economics.
One doesn't invest in cars, well, at least not the typical daily driven type. A car is a known depreciating item. One buys it to have a certain type of transportation. In many areas it is not actually a necessity either.
Overall though I agree that there's not a particularly useful comparison of buying a car to buying a house. Many more cars than not will wear out enough at some point to be destroyed, whereas the opposite is true of houses.
Yes, I am aware that cars are not investments. I responding to the post comparing buying a house to buying a car. SCR compared them, saying something like neither of them should be considered investments. One is an investment, one is not. That was my point.
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and when talking of buying a house in a certain area, that is the constraint. If more and more people want to be in that area, they will pay more and more for the same house. You can get much higher housing density with multi-unit buildings, but that's not the same as a house. The only way the land value goes down is the area becoming less popular. There are probably places where one could find land and housing that would be essentially fixed in price because the supply is not exhausted and demand isn't increasing. They might not be totally undesirable, but by definition they wouldn't be very desirable. 
