Why are the values of homes in the suburbs/urban areas of Pittsburgh the inverse of other cities? (Washington: condos, house prices)

[jimmyev]

Since I've been looking for a house in Pittsburgh, I've noticed something strange that I couldn't quite put my finger on. Then it suddenly occurred to me.

I've always wanted to live 'inside the loop' in Houston, but it was cost prohibitive. Like the rest of country, if you wanted an affordable home, you were directed to the tract housing and McMansions of the suburbs. Homes in the suburbs run about 30% less than homes inside the loop. From what I know of Washington, DC, Chicago and Los Angeles, it seems to be the same there also.

But the relationship between home values in Pittsburgh and its suburbs is the inverse. Homes in the city and 'streetcar suburbs' of Pittsburgh run 30% lower than homes in the suburbs. I love it.

Is this just because Pittsburgh is a decade or so behind other cities, or is it something intrinsic to Western Pennsylvania? If it's the former, there is great potential for investment.

[TelecasterBlues]

Dunno, I'd be interested in seeing how similar cities like Cleveland and Cinci measure up. Pittsburgh is a bit more spread out as far as ammenities go, the city center itself is not really the main draw, as downtown kind of dies out after rush hour and isn't stacked with entertainment possibilities and daily destinations. I think this in particular has a lot to do with it and would explain why we're the opposite of other major cities. I mean, downtown Houston has everything and anything located within its city core. Pittsburgh's ammenities are kind of tossed about throughout the different neighborhoods and districts with downtown acting as more of a business center by comparison. Desirability fuels realestate prices and there's not much desirability from Pittsburgh natives to live downtown from the look of things. Personally, I've always wondered why there's such a lack in brand new, downtown condos and whatnot within our city.

[BrianTH]

I'd suggest it is in large part a housing stock effect.

The City and some inner suburbs went through a dramatic population contraction--this was a common pattern in many cities post-WWII, but it was particularly dramatic in Pittsburgh thanks largely to the steel bust. At the same time, the housing in many of the affected neighborhoods is of decently high quality and durability (as a result of things like Pittsburgh getting a lot of skilled immigrants at the right time, the widespread use of locally-manufactured brick, and so on). Finally, for various reasons, including some active efforts by various organizations, we have been a little less quick with the bulldozer than some other cities (too quick in some cases, but nonetheless not as quick as some other cities have been).

The result is that we have a huge stock of currently underutilized but fundamentally sound homes in central locations, and that serves to keep housing prices down. That actually ends up filtering throughout the housing market, but it has the most direct impact on the prices in even well-developed central locations. Hence the unusual pattern you have detected.

In short, there aren't a lot of cities that both started with the housing stock that we had and then also went through as much of a population loss as we did without losing too much of that stock. And I personally think this ranks very high on the list of comparative advantages for the region--and while it is bound to ultimately prove temporary, barring a new population boom it should remain an advantage for quite a while.

[robrobrob]

I guess I am not sure if I agree with you. For starters, I think that you get more for your money in the suburbs since we have few "modern" homes in the city. If I wanted a comparable house in the city, I would probably have to pay about 100,000 more than I did in the burbs. However, I do agree that the priciest homes are less expensive in the city than they are in the burbs.

Also, most of our street cars are long gone so there isn't the same benefit to living in a street car suburb as there once was.

[Copanut]

Originally Posted by jimmyev

But the relationship between home values in Pittsburgh and its suburbs is the inverse. Homes in the city and 'streetcar suburbs' of Pittsburgh run 30% lower than homes in the suburbs. I love it.

.

You'll get very little appreciation on any home you purchase in the city, and the school district stinks. Plus, you'll pay 3% income tax in the city versus 1% in the suburbs. Make sure you register Democrat.

[BrianTH]

Originally Posted by robrobrob

For starters, I think that you get more for your money in the suburbs since we have few "modern" homes in the city. If I wanted a comparable house in the city, I would probably have to pay about 100,000 more than I did in the burbs.

This is an important caveat, and for pretty much the same reasons I gave above we are the most undersupplied when it comes to homes from very recent eras in central locations, and therefore the price for those homes is not as low (although still lower than they would be in many other cities of comparable size or larger).

Also, most of our street cars are long gone so there isn't the same benefit to living in a street car suburb as there once was.

The thing is that former streetcar suburbs have become desirable and pricey in other cities just for the relatively central locations and walkable neighborhood structures. And while not exactly comparable, PAT actually does provide pretty good transit service by modern standards in most of the relevant neighborhoods.

So without denying the tragedy of the loss of our streetcar networks, that doesn't really explain why those neighborhoods in Pittsburgh are more modestly priced than they likely would be in many other cities.

[robrobrob]

You'll get very little appreciation on any home you purchase in the city, and the school district stinks. Plus, you'll pay 3% income tax in the city versus 1% in the suburbs. Make sure you register Democrat.

It really depends on where you buy in the city. I think the people who live on the South Side, Shadyside, Squirrel Hill and the other nice areas of the city love their appreciation.

[BrianTH]

Originally Posted by Copanut

You'll get very little appreciation on any home you purchase in the city . . .

That very much depends on the neighborhood. Prior to the recession, at least, some of the highest appreciation rates in the region were in neighborhoods like the South Side and Lawrenceville, and some of the more established neighborhoods like Shadyside and Squirrel Hill were appreciating at pretty decent levels by historic standards (not by bubble standards, but in many cases that turned out to be a mirage anyway).

Edit: I see robrobrob made essentially the same point.

. . . and the school district stinks.

That also depends a bit on the neighborhood, and there are also some good magnet programs and charter schools in the City, and the City is getting a big Gates Foundation grant, and so on. And, of course, there are good private schools in the City. So this doesn't really explain why Pittsburgh's central neighborhoods are relatively less expensive than cities where the central school district is not particularly better (or overall considerably worse, such as in DC).

By the way, I don't want this to become a city versus suburb thing--they both have their attractions and it is a matter of personal preference. The question at hand as I understand it is why Pittsburgh doesn't have the same house prices patterns as some other cities, and some of these general suburb versus city points don't really distinguish Pittsburgh from those other cities, and so in that sense don't necessarily explain the divergent pattern.

[Geeo]

Appreciation in many city neighborhoods has been very good for years. These are stable, well-built, convenient neighborhoods very much in demand. For people who like having the convenience of established neighborhoods with good schools, shopping, transit service, parks, and other amenities, most east end neighborhoods would be high on the list. And it shows in the low vacancy rate and home appreciation.

[Fiddlehead]

As someone who is looking at Pittsburgh, in awe of the affordable housing stock, and desires a simple,ecologically-sound lifestyle, I think the street car neighborhoods are quite appealing. Of course, I am also considering the expectations of the subsequent eras with respect to lot size, green space, traffic,etc. So, I can recognize that folks could go either way, but I would certainly say there is a market for the street car areas.

I will stick my neck out here and say that West Coast folk from Hollywood to Berkeley to Portland to Seattle will get wind of these values and the ability to live an ecologically-sensible lifestyle and invade...soon. The differences in value for a starting family are just too vast for Pittsburgh to remain undiscovered.