Sunday, January 27, 2008

Not missing a zero - Mon Valley real estate prices

In recent years I have heard ever more often from friends and colleagues about out-of-town investors coming into the region to buy real estate here because it is perceived as such a bargain. In some extreme cases I am told this happens with properties being bought sight unseen. Perception of value is often based on one's own experiences and the truth is that some of the local real estate prices must seem unbelievable to those trapped in regions that have seen tremendous appreciation over the last decade or two. No matter how inexpensive, the point is to buy an asset that will increase in value and you have to wonder if some people from out of town know what they are getting themselves into. The print version of the Sunday PG has their regular real estate roundup (using RealStats data) focusing on some Mon Valley communities. For Clairton in 2007 (through September) the median sales price for homes came in at $18,000. For out of town readers, there is no zero missing in that. It's not a small universe problem either, that median was generated from a respectable 151 sales. Remember median means that half of those sales (75 of them) came in below $18K. That means you can buy a home there for cents on the dollar compared to what just a parking place costs in New York City. If the median sales price were to go to an equally unbelievable $36K, someone could claim to have made 100% on their investment, even if completely unleveraged.. yet that $18K median value according to the realstats data in the PG is actually down from a median of $19K the year before.

4 Comments:

Blogger Char said...

But if these properties are used as rentals ..... that changes the equation a lot.

If you pay cash for that $18,000 house and rent it out for $500/mo.....Even after considering closing costs and yearly property taxes, etc ...... You're looking at a yearly return on investment of over 20%.

Its hard to find a better place to plunk $20K and get those kind of returns.

Monday, January 28, 2008 8:12:00 AM  
Anonymous Anonymous said...

If someone can afford to pay $500 monthly rent, they will not be renting in Clairton.

Monday, January 28, 2008 9:07:00 AM  
Anonymous Anonymous said...

I don't know if home prices in Clairton will go up much, but if enough out-of-towners keep doing this... maybe it will become a self-fulfilling prophecy. And maybe that is not such a good thing for Clairton.

But hey I'm no expert, so take what I say as just musing.

Monday, January 28, 2008 9:16:00 AM  
Anonymous TrolleyRider said...

Anon 9:16

Could you please explain for the rest of us how on Earth home prices in an area doubling would be bad for people already living there? Especially when we are talking about going from 18k to 36k?

Monday, January 28, 2008 10:03:00 AM  

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