A decade ago, more than a third of Pittsburgh-area homes on average were decreasing in value
In U.S. cities where home values reached a boiling point 10 years ago, real estate speculation became so rampant that prices were skyrocketing and buyers were getting caught up in bidding wars based on the mantra that housing prices would keep rising.
Meanwhile, Pittsburgh real estate prices by 2007 had barely moved a muscle.
Property values in this region — which lost a lot of its population when the steel mills closed in the 1980s — had either remained flat or grown at a snail’s pace. Another factor in keeping prices steady: The historical inclination for residents here to remain in their homes for decades rather than relocate from one house to another.
Prior to the spectacular bursting of the nation’s residential housing bubble, 30.1 percent — nearly a third — of Pittsburgh region homes on average were decreasing in value, according to Zillow, an online real estate marketplace.
The national median price for existing single-family homes during the third quarter of 2007 was $220,800. For Pittsburgh, that figure was $127,700 — partly due to sales being so sluggish that sellers were dropping their asking prices to close deals.
It was an opportunity for people like Pittsburgh developer Al DePasquale, who in 2007 purchased a portfolio of 18 run-down single-family homes on the North Side for a total of $360,000.
“That’s where I started,” Mr. DePasquale said. “The houses were all boarded-up. They were all in Historic Deutschtown. I rehabbed every single one of them like new.”
He has renovated about 40 homes and developed about 25 new homes on the North Side in the past 10 years. But it’s getting more difficult to buy even two properties a year now, he said. Even a boarded-up house in the same neighborhood now costs between $80,000 and $90,000.
Today, a standard renovated three-bedroom, 2,200-square-foot home on the North Side will set you back around $475,000. The same home will sell for $350,000 in Manchester; $550,000 in Allegheny West and between $500,000 and $600,000 in the Mexican War Streets, based on advertised sales prices.
Overall home prices throughout the Pittsburgh region have risen significantly in the past decade to an average of $182,748 at the end of 2017.
Some communities have performed better than others during that time.
According to data provided by RealSTATs, a North Hills-based real estate information service, 131 of 144 municipalities in Allegheny County had positive appreciation between 2008 and 2017. And 10 of the 15 highest-appreciating communities in Allegheny County during that period were neighborhoods in the city of Pittsburgh,
Watching home prices surge in 5 neighborhoods
Average home prices, Pittsburgh neighborhoods (2008 vs. 2017)
“The city is hot,” said Dan Murrer, president of RealSTATs. “We saw double-digit price gains annually in some communities in the city during that time frame.”
The biggest winner by far was Lawrenceville, where average home prices jumped 224 percent from $72,993 to $236,951.
Squirrel Hill was another solid neighborhood that saw a 41.8 percent increase from an average price of $281,185 to $398,756.
The tiny North Side community of Fineview outperformed several more popular city neighborhoods with a 168 percent rise from an average $62,340 sales price to $167,638.
Other city communities that saw triple-digit gains for the past decade were Polish Hill with a 145 percent increase from $94,654 to $232,246; and Manchester with a 145 percent price appreciation from $76,106 to $186,861.
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Allentown-Beltzhoover had languished prior to the Great Recession but posted an 82 percent gain from $57,318 to $104,472 by last year.
Traditional suburban communities that have a strong reputation for good school districts, low crime and quality housing were able to hold their own even if they did not have as much price appreciation.
Upper St. Clair saw a 12.6 percent increase from $283,968 to $319,708. Bethel Park average home prices rose 24.5 percent from $148,171 to $184,487; and Mt. Lebanon posted a 37.4 percent gain from $217,459 to $298,684.
Although much of the price appreciation in suburban communities has been driven by new construction, higher home values in city neighborhoods reflect the critical role that house flippers have played in turning neighborhoods around by buying and rehabilitating vacant row houses, crumbling mansions and run-down single-family homes.
Flippers in the Pittsburgh market were able to buy houses so cheaply that by 2015 the Steel City had earned a reputation as the No. 1 most profitable place to flip houses in America, according to RealtyTrac, an Irvine, Calif.-based company that collects data on national real estate trends.
Pittsburgh flippers stood to earn an average 106 percent return on their investment. New Orleans came in at a distant second place with flippers earning an average 76 percent return. Baltimore ranked third place with flippers earning an average 73 percent return.
The Pittsburgh market emerged from the housing crisis as one of the nation’s strongest real estate markets. However, during the 10-year period from 2008 to 2017, the region also had its lowest number of deed transfers in 25 years.
Allegheny County in 2011 had its worst year ever for deed transfers, when there were only 10,300. The peak year for deed transfers was 2005, when there were 23,450 deeds transferred.
Mike Netzel is a real estate agent for Keller Williams Realty who sold $11.5 million in Pittsburgh real estate last year. As Pittsburgh gained national attention in 2011, he said he received a call from a woman in California who had cashed $500,000 out of her primary residence and wanted to buy investment property in Pittsburgh for cash.
“She never owned investment real estate but had heard on the news that Pittsburgh was the place to buy,” Mr. Netzel said.
“I told her investing in real estate is a great idea, but she deserved to be where she could see, touch and feel what she bought. Since the state of California was literally on sale at that time, I suggested that she buy something there.
“The number of people who call me with $500,000 cash to buy real estate is a small group,” he said. “But that is just one example of how hot this market was and the reputation we had while the rest of real estate across the nation was in the toilet.”
Tim Grant: firstname.lastname@example.org or 412-263-1591.
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