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Old 05-06-2008, 10:28 PM
 
20,273 posts, read 32,869,081 times
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Humanoid,

Your predictions are duly noted.
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Old 05-06-2008, 10:57 PM
 
20,273 posts, read 32,869,081 times
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Quote:
Originally Posted by Tallysmom View Post
Can you explain the Case Schiller thing to me? I keep seeing it put out there with no clear explanation... and I can't seem to make sense of it.
So the various Case-Shiller indices use something called the "repeat sales methodology" to track detached single family home prices in a given market. What that means is they need data on detached single family homes that have sold at least twice (which, among other things, excludes condos (not detached) and new homes (not sold twice)). That gives them an accurate measure of the actual appreciation (in nominal terms) of that particular home between the two dates of sale. The mathematically complicated bit is how you then assemble all that data over different time periods into a single index, while also trying to deal with issues such as homes being remodeled, foreclosures, and so on. But suffice it to say that most people think their methodology does a reasonably good job pulling all this together, subject to the limits of their data (again, no condos, no new-builds, and so on).

They now do this monthly for 20 metropolitan areas, and then also compile two broader indices, one using 10 of the areas, and one using all 20. They also have a quarterly version for the whole country, built up from weighting separate indices for the different census divisions.

Pittsburgh, incidentally, is not one of the 20 metropolitan areas. So, there is no Pittsburgh-specific data available from Case-Shiller. Also, the smallest unit they track is these metropolitan areas, so you can't use their indices to compare housing price trends between different parts of a given metropolitan area (or between similar parts of multiple metropolitan areas). So, for example, you couldn't use their data to compare city centers to inner suburbs to exurbs and so on. And the various exclusions (of condos, new builds, and so on) could end up distorting those sorts of comparisons anyway (e.g., looking only at detached single family homes in Manhattan may not give you something representative of the general Manhattan housing market).
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Old 05-07-2008, 01:27 AM
 
15,631 posts, read 26,117,738 times
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Quote:
Originally Posted by BrianTH View Post
So the various Case-Shiller indices use something called the "repeat sales methodology" to track detached single family home prices in a given market. What that means is they need data on detached single family homes that have sold at least twice (which, among other things, excludes condos (not detached) and new homes (not sold twice)). That gives them an accurate measure of the actual appreciation (in nominal terms) of that particular home between the two dates of sale. The mathematically complicated bit is how you then assemble all that data over different time periods into a single index, while also trying to deal with issues such as homes being remodeled, foreclosures, and so on. But suffice it to say that most people think their methodology does a reasonably good job pulling all this together, subject to the limits of their data (again, no condos, no new-builds, and so on).

They now do this monthly for 20 metropolitan areas, and then also compile two broader indices, one using 10 of the areas, and one using all 20. They also have a quarterly version for the whole country, built up from weighting separate indices for the different census divisions.

Pittsburgh, incidentally, is not one of the 20 metropolitan areas. So, there is no Pittsburgh-specific data available from Case-Shiller. Also, the smallest unit they track is these metropolitan areas, so you can't use their indices to compare housing price trends between different parts of a given metropolitan area (or between similar parts of multiple metropolitan areas). So, for example, you couldn't use their data to compare city centers to inner suburbs to exurbs and so on. And the various exclusions (of condos, new builds, and so on) could end up distorting those sorts of comparisons anyway (e.g., looking only at detached single family homes in Manhattan may not give you something representative of the general Manhattan housing market).
Now I get it... thanks much.
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Old 05-07-2008, 02:06 AM
 
Location: Los Angeles Area
3,306 posts, read 4,133,008 times
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Quote:
Can you explain the Case Schiller thing to me?
BrianTH beat me to it.

Quote:
You do realize 35k is a very normal graduate salary in Pittsburgh and many other areas of the country.
After tax that 35k will give you around $2,400 a month. You wouldn't be able to purchase a decent house in the city or even in a good suburb of the city (On that salary you couldn't afford much over $85k). I would find it very hard to live off that since I have student loans to pay off. Even with a modest lifestyle you'd have little to save each month. If you're living in the city living off $35k a year would pretty much suck.

Regardless of this or that, if you post a job and don't find anybody to fill it the most likely explanation is that the salary isn't high enough. Assuming of course you're smart enough to post the job where people look etc. This is how the market speaks. The price of labor is determined by the market, not what people on a forum think it ought to be.

Lastly, just to post it if anybody is interested the reason why Case-Shiller is a better index to track right now can be found here:

Calculated Risk: House Prices: Comparing OFHEO vs. Case-Shiller
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Old 05-07-2008, 08:43 AM
 
357 posts, read 885,298 times
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Quote:
Originally Posted by BrianTH View Post
Not exactly, and indeed if it was identical to those cities it would presumably be just as expensive.

Of course Pittsburgh is not completely alone in having such a history: many other post-industrial cities in the interior of the country have followed a similar boom-and-bust track, and thus also offer similar goods for relatively low prices--but usually not quite as low as Pittsburgh.
So, then you are saying Pittsburgh's comparable cities are other interior post-industrial cities, rather than Boston, NYC, DC, etc.?
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Old 05-07-2008, 08:43 AM
 
Location: Saint Petersburg
632 posts, read 1,733,691 times
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Quote:
Originally Posted by guylocke View Post
You do realize 35k is a very normal graduate salary in Pittsburgh and many other areas of the country.

The NATIONAL average medium income for an individual above the age of 25 is shy of 35k. It drops even more if you do individuals 18 and older which then medium salaries drop even below 30k (okay, actually, those are numbers from 2006 so it might be SLIGHTLY higher). Considering the cost of living in Pittsburgh and cost of property, I think 35k is a very reasonable sum of money for college grads in this area and I have many friends who would be more than happy to settle for that as a starting position.

A HUGE bulk of all Americans make between 25k and 50k a year. While 35k isn't spectacular, I imagine a basic IT position doesn't even necessarily require a 4-year degree.
According to the U.S. Census Bureau, the median income for Allegheny County is just about $42K. That figure undoubtably includes many families in which both people work, so clearly *somebody* in Pittsburgh is taking jobs that pay $35K or less.

This figure also implies that, as you say, $35K is in fact probably a completely reasonable (or even good) entry-level salary for the region.

Now let's compare the cost of living for Denver/Boulder vs. Pittsburgh again in terms of median income:

Pitt Median Income = $42K; Pitt Median Home Price* = $84K, or ~2X the average salary (and additionally right in the range of what many real estate professionals consider to be an affordable and safe ratio between income and mortgage)

Denver Median Income = $40K, Denver Median Home Price* = $166, or ~4X the average salary

Boulder Median Income = $45K, Boulder Median Home Price* = $305K, or ~7X the average salary

And just for fun, I did Charlotte, a city that is often mentioned here as the anti-Pittsburgh:

Charlotte Median Income = $47K, Charlotte Median Home Price = $134K, or ~2.85X the average salary (not too bad, actually, and comparable to the 'Burgh). However, I can't resist pointing out that somebody in Charlotte must be taking jobs that are $35K or less also.

Now, I think we can argue till we're blue in the face about whether Pittsburgh is subjectively a better place to live than Boulder (and I have no doubt many, many people would say no) or anywhere else. But something I don't think anyone can or should argue about anymore is the fact that housing is very, very cheap here when compared to median income levels, and when put up against a lot of other places in America.

*For consistency's sake, I use the 2000 home price figures here rather than the more updated figures I quoted yesterday, to match cited 2000 median income levels.

Last edited by subdivisions; 05-07-2008 at 09:22 AM..
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Old 05-07-2008, 08:47 AM
 
Location: Pittsburgh
29,627 posts, read 34,103,329 times
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Quote:
If you're living in the city living off $35k a year would pretty much suck.
I do it, and it's not as difficult as you'd think. And I bought a house two years ago.
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Old 05-07-2008, 08:52 AM
 
357 posts, read 885,298 times
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Quote:
Originally Posted by subdivisions View Post
Sure, but the median home price in Boulder is $366K, which is 342% higher than Pittsburgh's median home price of $107K.
Is the median home in Boulder the same size and in the same shape as the median home in Pittsburgh? They may be quite different kinds of houses...
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Old 05-07-2008, 09:12 AM
 
20,273 posts, read 32,869,081 times
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Quote:
Originally Posted by Tallysmom View Post
Now I get it... thanks much.
No problem!
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Old 05-07-2008, 09:12 AM
 
Location: Saint Petersburg
632 posts, read 1,733,691 times
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Quote:
Originally Posted by scrapp View Post
Is the median home in Boulder the same size and in the same shape as the median home in Pittsburgh? They may be quite different kinds of houses...
I would guess that Boulder homes are both newer and larger than the average Pittsburgh home.

But that still wouldn't help those Boulder residents who would be satisfied with 1200 square feet and can't afford any house (large, small, new or old) which costs over $300K while making $45K yearly.

On edit: I take it back about the larger thing - it is quite possible to buy 5-6 bedrooms in the city of Pittsburgh for under 100K. But you likely would have to be willing to put sweat equity into the property to make it modern. Similar houses in Boulder are likely to be much more up-to-date.
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