Wednesday, June 25, 2008

The Yin and Yang of housing markets in Pittsburgh

So here is a headline from last week about the Pittsburgh Real Estate market "Pittsburgh Housing Market Continues To Slump". Slump? The vast majority of press coverage on real estate stories across the country focus on the trend in real estate prices, not the number of sales which seems to be where this story is getting a slump. One of those curious things is that we (the royal we) choose to emphasize the most negative angle possible on most every economic story. If you read the story it mentions almost in passing near the end that local real estate prices actually increased 4.7% May over May in the same data. From the headline that just isn't much of a story at all. Should it be? It's just plain weird that the main story (prices up) is all but overlooked to get that headline.

The standard metric these days for tracking the national housing miasma is the Case-Shiller Index. That index for the record tracks real estate prices not the number of transactions. Our problem is that it covers 20 regions across the country, but does not include Pittsburgh. You can see their latest data through April is here. What is well commented on elsewhere is just how bad that index is doing in all markets. Their April over April numbers show housing price declines in all 20 Case-Shiller markets, some by almost 27% in just the last year. So if Pittsburgh is having a 4.7% increase while most everyone else is having double digit declines it makes you wonder a bit why the headline emphasizes that the number of transactions is down and not just how unique it is for prices to be going up as they are here. I am sure there are a few other regions showing price appreciation, places like Houston for example. But there is no big oil industry here benefiting from higher energy prices. That makes continuing housing appreciation that much more interesting. You can't chalk it up to any one anomalous reason to explain why housing prices are going up here while dropping through the basement most everywhere else.

So really bad practice and something I would only do on a blog.. but mixing time periods and data sources in a way that I ought not to... if you graph the April over April Case Shiller data and add in the May over May data being reported locally you get this picture.

It's one thing to just say that things are not as bad here as elsewhere, it's another thing entirely to show that housing prices are still moving respectably in the opposite direction of most other regions. Depends on how you measure it, but I think that +4.7% actually represents a slight acceleration in local housing prices over the last couple of years which just makes the headline of the continuing slump here even odder.


Anonymous Anonymous said...

How can one get data on Pittsburgh home sales? I'd love to see a month to month graph over the last year or two, maybe broken out for above-median and below-median sales.

Thursday, June 26, 2008 2:52:00 PM  
Anonymous Anonymous said...

Buffalo market is also appreciating.

Thursday, June 26, 2008 9:39:00 PM  
Blogger John Morris said...

I was wondering if there is any truth to the rumors that urban, inner city real estate is seperating and outperforming stuff on the suburban and ex urban fringe in a lot of markets. That seems to have happened in NYC, with weakness in Staten Island and oute Queens as well as suburban New Jersey.

The NY Time and the Atlantic have published dramatic articles hyping the possible death of suburbia and I am wondering and rooting around the grave site.

Saturday, June 28, 2008 3:12:00 PM  
Blogger C. Briem said...

It has to be true that much higher commuting costs will impact the differential costs of living in the city or far suburb. Some recent work at Brookings and elsewhere has documented some of those trends already.

That being said, the death of the suburb has to be greatly exagerated at this point. Consider a household that was more than happy to buy a house far out when gas was $3/gal. With gas at $4/gal they face a choice to keep their costs where they were: keep their current vehicle and move closer to their job or keep their house and find transport that is 25% more fuel efficient. I bet the latter is easier for most people if push came to shove and if that household was driving a fairly large SUV, finding an alternative that is 25% better at gas mileage is not that hard.

Not that simple of course. If some people start to move into the city and suburban house prices fall, then it becomes cheaper to live in the suburbs. Then that same representative household could make up some of their costs as a result without needing to move into the city nor find cheaper transport.

Where I would look to see how this is all playing out would be in the exurban fringe which is where commuting distances are longest.

Sunday, June 29, 2008 7:10:00 AM  
Blogger John Morris said...

I likely agree with you. Another big factor is just supply and demand. I don't think many cities are generating anything close to the kind of supply that would be needed to let most people shift back. Zoning laws and land use restrictions still tilt heavily towards sprawl.

The other shoe, yet to drop is the impact of increasingly bankrupt governments to support and repair a lot of road infrastructure. I think, the Jersey Govenor proposed big increses for the Jersey Turnpike and tolled roads and private roads seem the wave of the future.

Sunday, June 29, 2008 2:00:00 PM  
Blogger John Morris said...

By the way, NYC is one of the few cities I know of that actually a attracts residents because of it's relatively low residential property taxes.

I think it shows that reasonably designed mixed use development tends to be profitable for the city in terms of infrastructure vs. tax revenues. The big problem is clearly that most American cities are not well designed or run.

Sunday, June 29, 2008 3:08:00 PM  

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