PRICED OUT

When the subject of unaffordable housing makes headlines, the usual suspects — New York, San Francisco and Los Angeles — top the list.

But housing is becoming increasingly expensive in a wide range of other American cities, including Pittsburgh.

In 2015, there were 23 wards out of 32 in the city of Pittsburgh with median housing sale prices of less than $150,000. Today, the number of wards with homes at that price range has dropped to 18.

“This is basically a seller’s market. Buyers are waiting in line to purchase, but there’s nothing to purchase,” said Karl Owens, a real estate agent in Howard Hanna’s Sewickley office. “If an opportunity arises, it will typically go into a bidding war, which means multiple offers.”

Mr. Owens, who is among the leading listing and selling agents in the North Side’s Mexican War Streets community, said the inventory of homes for sale has been low for three years because of what the city market is missing — move-up buyers.

Move-up buyers don’t have to move or look for something different than what they already have. At the moment, he said Pittsburgh homeowners who could be move-up buyers are opting to stay put. Thus, there aren’t a lot of listings.

Instead, the market is being driven by first-time buyers, empty nesters and transients who have moved in from elsewhere.

“Five years ago, there were more opportunities,” he said. “There were more homes. Typically I was carrying about 50 listings back then. Now I carry about 20 to 30 listings if I’m lucky. If a product is in move-in condition and ready to go, it will sell in a matter of days.”

Property values in this region — which lost a lot of its population when the steel mills closed in the 1980s — for many years remained either flat or grew at a snail’s pace because of an overabundance of available housing.

While some of the most desirable city neighborhoods have for the most part always been out of reach for many, a growing number of neighborhoods — particularly in the East End — have become priced out of range for Pittsburgh residents earning median household incomes.

The rule of thumb long used is that you can afford a home if its price is equivalent to roughly 2.6 years of your household income.

Based on data from the 2016 Census Bureau, the median household income for the Pittsburgh metro area is $56,063. Using the standard affordability ratio, that would mean that a house priced at $145,763 would be on the top end of what a single-income family could reasonably afford.

Spiking median prices, after many calm years

According to data supplied by RealSTATs, a Ross-based real estate information service, the city’s overall median home price in the year ended July 30, 2018, was $133,959.

While that might sound great to those coming here from high-priced Silicon Valley, Pittsburgh home buyers will note that’s an increase of more than 27 percent from the $105,750 recorded three years earlier.

“For all the years I have been doing real estate I could say Pittsburgh does not do the boom-bust thing. Pittsburgh has been kind of pokey throughout the years,” said Charlene Haislip, a real estate agent with ReMax in Squirrel Hill.

“The median price of a home here would go up about 5 percent annually, which is a good return on passbook savings,” she said.

The median home price represents the midway for all houses sold at market value over a set period. So half of all city homes sold in the year ended July 30, 2018, sold for less than $133,959 and half sold for more. Homes selling for less than $10,000 are not part of the equation.

Pittsburgh missed the infamous housing bubble during the early 2000s that pushed prices to grossly inflated levels in many cities nationwide. Real estate prices here barely moved while rampant speculation left many in so-called “hot markets” holding more debt than their homes were worth.

But as the nation climbed its way out of the Great Recession, the tech industry attracted more job transfers and the market gained attention from real estate investors because of its housing stock known for stability, affordability and value.

Information compiled by Attom Data Solutions, an Irvine, Calif.-based real estate service, shows over the past five years median home prices in the city of Pittsburgh have appreciated 36 percent.

For the same period, median prices in the Pittsburgh metro area have increased 25 percent. (The Pittsburgh metro area includes Allegheny, Beaver, Butler, Washington, Westmoreland, Fayette and Armstrong counties.)

Statewide, median home prices rose 17 percent over the past five years, according to the firm.

“Our data shows home prices are rising at a faster clip in the city of Pittsburgh than in the Pittsburgh region or statewide,” said Daren Blomquist, senior vice president of Attom Data Solutions.

Mr. Blomquist said the national median price increase over the past five years stands at 40 percent — not far above Pittsburgh’s 36 percent gain.

“When we talk about the national median price increase, we are throwing in places like San Francisco along with towns in Alabama,” he said. “You have hot markets across the nation that get a lot of attention for market growth like the Bay Area and Texas, along with depressed communities that may have even declined during that time.

“The fact that housing prices in the city of Pittsburgh are just a little behind the national median is impressive, and it’s surprising to people who don’t think of Pittsburgh as one of the high flying markets.”

Mr. Blomquist said this type of appreciation raises concerns about affordability. “A 36 percent increase in five years averages to about 7 percent or 8 percent a year,” he said.

“In most parts of the country, people’s wages are not rising 7 percent to 8 percent a year. Home prices may be getting further out of reach of prospective home buyers in the Pittsburgh market.”

Not just the East End

The East End has seen the greatest rate of increases in the last three years. Shadyside and Squirrel Hill predictably lead the pack, with Shadyside posting a median housing price of $387,500 and Squirrel Hill at $380,000.

But wards that include Lawrenceville, Polish Hill, Highland Park, Oakland, East Liberty, Morningside and Stanton Heights also have seen steep rises.

Pockets of the North Side experienced high growth, particularly the wards covering Manchester and East Allegheny, which includes the Mexican War Streets.

“I don’t think it’s primarily in the East End. We are seeing home price growth throughout the city,” said Marian McGinley, manager of Coldwell Banker’s office in Shadyside.

“People who can’t afford the high-ticket prices are venturing to other neighborhoods where they can get something more affordable, like the North Side, Observatory Hill, Brighton Heights, Lincoln-Larimer and North Point Breeze.”

Drops happened only in four wards during that three-year span: Homewood and East Hills, with median home prices of $20,000; Lincoln-Lemington-Belmar and Larimer, at $26,000; and Allentown, Beltzhoover and Bon Air, at $50,000.

For now, low interest rates have kept monthly mortgage payments at low levels. In fact, some of the spikes in the hottest city real estate markets — such as Lawrenceville and other East End neighborhoods — have been egged on by investors seizing on low borrowing costs.

However, the cost of borrowing money is climbing.

The Federal Reserve recently raised its key interest rate for the third time this year. The Fed also signaled another increase is in the cards before the year’s end, and three more hikes are forecast for 2019.

National real estate expert Michael Sichenzia said the city of Pittsburgh is among the second-tier cities that are five years into a cycle where real estate investors have been flipping their way to wealth. Other such markets include Detroit and Cleveland.

“Coming out of the recession, you had all these speculators looking for the next big thing,” said Mr. Sichenzia, president of Go Global Advisors Inc. in Fort Lauderdale. “We are seeing the makings of a bubble in second-tier cities that did not previously have an affordable housing issue.”

He said Pittsburgh is already experiencing a mini tech-driven housing bubble fueled by dozens of companies that have attracted young adults. Those new arrivals — often well compensated — may be paying top dollar for housing in hot communities.

But he fears home prices cannot keep rising at this pace.

“It comes crumbling down when the last guy can’t find a chair when the music stops,” Mr. Sichenzia said. “The music stops when the buyer doesn’t have the income to qualify for the mortgage.

“And we are getting there now. The one thing not going up is wages.”

Tim Grant: tgrant@post-gazette.com or 412-263-1591.

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