Monday, January 17, 2011

depends what your definition of stability is

So I don't quite get the semantics of this story in PG Sunday on real estate in some Mon Valley communities.  The crux of it is how real estate prices have nominally stayed the same over an amazing 23 year period. You can see the table they have there of nearly identical prices in both 1987 and today for 6 distinct municipalities.  The numbers are remarkably identical. 

Never mentioned is that those are nominal prices.  Inflation has not been high over last few decades, but not nonexistent and compounded over a quarter century it adds up.  A dollar in 1987 is worth $1.92 today by just a CPI calculation alone.  So to begin with, real estate in these areas have not been "treading water" as desribed at one place in the story, but that they have seen their real real estate valued drop by half all while real estate values have appreciated (in both real and nominal terms) most everywhere else in the nation.  Just not a place you would want to invest your savings into and when you consider your mortgage is really a very leveraged investment to begin with...  you can potentially lose a lot if your value does not appreciate.  

The story also repeats a common misconception that for many of these communities the population left when the jobs left which just isn't the case.  Braddock as a case in point, but the story is true for places like Duquesne and McKeesport as well.   People has started moving out of the community long before the 1980's as workers found themselves more and more able to buy homes and live further away from their factory jobs in these communities.  The paradigm of mill workers living in the mill-town is an image from a century ago, not the 1980's.  In almost all Mon Valley communities, the percentage and absolute population decline between 1960 and 1980 was far larger than the population decline between 1980 and 2000 when the jobs went away.  There were some good years for workers in both employment counts and wages in those earlier decades and before, yet that is when the trend was even worse than today. Seemingly counterintuitive it was those income gains that probably facilitated the population loss we are only at the trailing end of today.

May not be easy to read, but here is a chart of all those population changes over time. Source is page 58 (per the pdf numbering) here which also has a section focusing just on Mon Valley trends starting on page 56.

Why do I beat on the subject?  Do I want to be a nabob?  Over the years nowhere are the myths so incongruous with the facts as in the Mon Valley and until we get to some ground truth on the facts there isn't much hope on making things better.  The myth (or crutch) that it was the steel jobs leaving these communities that left them in the condition they are in has never been true.  

As for real estate.  There was a point between the 2001 and 2002 reassessments in Allegheny County that it was seriously discussed if the county should just set the property values in some of these same communities to zero.  Of course, the public finance system would break down if you did that.  Equity issues or not, if there is no base property valuation, municipalities and school districts would not be able to raise any revenues at all. 

The real truth is that the true economic prices of many of the homes in the area are not zero, but negative. Nothing theoretically wrong with negative prices, but it just does not work for local public finance.  I don't think any of these communities have the $$ to send money to their local property owners every year while giving up their main source of income.  Don't believe the negative value?  The vacancies are high, many properties are not put through sheriff sale because it would cost more for the banks to process than they could recoup.  The markets are just not clearing even at these barely existent prices.


Anonymous The Wiz said...

Interesting that Trafford had a population of 0 in 1980, Apparently, the census was taken on Jan 20 that year and all of Trafford was in Pasadena to watch the Steelers beat LA in Super Bowl XIV

Monday, January 17, 2011 10:40:00 AM  
Anonymous MH said...

I had no idea that McKeesport and West Mifflin were ever in to five digit population figures, let alone still there.

Monday, January 17, 2011 11:39:00 AM  
Anonymous Anonymous said...

Yes, indeed. At its peak, I believe that McKeesport had about 55,000 people. A lot left for West Mifflin as its population boomed after World War II.

Monday, January 17, 2011 1:42:00 PM  
Blogger C. Briem said...

Trafford is mostly in Westmoreland County. When you hear people say there are 130 munis in Allegheny county, they are including both Trafford and McDonald which is mostly in Washington County.

Monday, January 17, 2011 3:01:00 PM  
Blogger joe said...

Wilmerding had over 6,000 residents in 1910.

My great-grandfather worked at Westinghouse Air Brake (his start of service with them was 1889). My grandfather lost an eye on the streets of Wilmerding in a rock fight as a boy.

I am the Wilmerding Diaspora, hear me roar.

Or maybe just watch my YouTube movie:

Wilmerding, PA 1904

I made it a few years ago, and right now about as many people have viewed it as live in the town of Wilmerding.

I used the "audio swap" function to replace the music with a fine pre-approved track (I'm told that disqualifies me from profit sharing, and means there might be ads embedded in the video).

So, after a million or so hits (in a million years), how about some embedded ads for WABCO and/or Wabtec, all proceeds benefiting the town of Wilmerding?

It's simple!

Wednesday, January 19, 2011 5:23:00 PM  

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