Friday, July 06, 2012

Revenge of the Insulbrick

So it made a bit of news, but really not what it deserved.  I will say that there really is something weird (a technical term) going on in Pittsburgh's real estate market.  By some recent data, the year over year price appreciation in the local real estate market is an insignificant smidge below +13%. That just isn't normal anywhere these days, and certainly not normal for Pittsburgh at anytime in recent memory.  Remember that national real estate markets remain mostly in the dumpster and given relatively low inflation rates we are talking what may be truly unprecedented price jumps for the Pittsburgh region when measured in real (i.e. inflation-adjusted) terms.


Maybe not so weird actually.  Sometimes that darn economics gives an insight.  Let's stick just to supply and demand.  We've gone over how net migration for the region has turned positive in recent years and I will lay a professional guess that it remains so strongly as I type.  The change in net migration is in itself not a big flow, but remember prices are set at the margin.  So the switch from net decline to net gain could at the margin be quite impactful in some parts of the real estate market.

But supply.  The real estate professionals, and I concur, are saying there is a big local supply shortage of housing at this point.

Let's focus for a second on just the City of Pittsburgh.  The main story is for the region, but I have personal observations that some really extraordinary things are going on in some city neighborhoods.  What is the supply situation there?   Here is a time series of note.  This is the time series for the total number of residential housing units specifies in building permits within the City of Pittsburgh. 


 
So note these are just the numbers in the building permits.  Not all permits result in final construction so if anything these numbers are higher than reality.  Yet they are pretty minimal numbers.  Roughly 150K housing units exist within the city.  So you would need to see maybe 1,500 new units a year if we were growing or replacing at a rate of 1% a year.  We are not even close to that rate anyway.

That of course is not really the story for the city.   We are an outlier in another big important way.  Its not like the existing housing stock would be stable if there were no new building permits.  The city of Pittsburgh has one of the oldest housing stocks in the nation.  If there was a measure for 'real age' I am sure we would be off the chart.  Unlike some other 'old' cities and regions (Boston for example), I will stake a large bet that our housing stock is at a whole different level of disinvestment.

To put a point on that and crib from some colleagues.  Below is a map the average age of housing by city of Pittsburgh neighborhood.  In itself it may not seem like it is that interesting, but suffice it to say that the range of ages depicted are not normal for a large swath of the nation.  Let's put it another way.  In a lot of places, any housing that remains from the 19th century is likely a tourist destination. 

One likely result of such old housing almost has to be a rate of depreciation higher than most anywhere else at this point and the effective loss of housing every year. Likely that loss is more than the minimal building permits data so we are likely net negative.  That situation is probably further compounded because even the housing that is habitable likely is not the type of housing marketable to your typical new resident moving into the region. Couple it all with historically low mortgage rates in a region which likely has a lot more folks with decent credit compared to elsewhere these days and it all makes a lot of sense.




I have an idea!  Let's have a contest for the ugliest insulbrick anywhere in the region.  I will think of a prize.  Bonus points for pictures that show walls with multiple layers of different types of insulbrick. 




13 Comments:

Blogger joe said...

Appreciatively speaking, how about the most beautiful Insulbrick makeover? Just a $250-quick-fixer-upper.

Who knows, it could lead to an entire folk craze in Pittsburgh (by way of Indiana), making over front porches...part archaeological exploration of assorted layers (newspapers in these old river side frames?), and part neighborhood/ community get-out-and-do-something-for-your-country 19th century secular revival amid the urban gardens?

The Insulbrick Manifesto.

Saturday, July 07, 2012 9:10:00 PM  
Blogger Bill Price said...

Chris, you don't have to worry about having a contest- the building I live in in Oakland (built in the 1880s, if I remember right) apparently incorporates every shade, texture, and shape of insulbrick ever manufactured, not to mention several other types of siding. Take a look here.

Sunday, July 08, 2012 1:46:00 PM  
Anonymous MH said...

That's all painted basically the same color and the entire exterior is covered in something that looks more or less weather proof. That can't possibly win.

Monday, July 09, 2012 9:42:00 AM  
Blogger JRoth said...

Are Occupancy Permit data available? That seems more useful than Building Permits.

Worth noting here that, if you have an old, but still legal, Occupancy Permit for, say, an upstairs apartment, you can fix it up and rent it out for the first time in 20 years without ever showing up in the City data. No idea how common that is, but it certainly happens.

Wednesday, July 18, 2012 2:12:00 PM  
Blogger JRoth said...

Also, there are an awful lot of "most anywhere else" type comments in this post that seem to reflect a poor understanding of the housing stock in most cities east and north of here. Yes, you hand wave at the presumptive investment in old housing in Boston, but in a city like Baltimore, you have literally thousands of units older than nearly anything in Pittsburgh (the number of pre-1850 houses in Pittsburgh is in the double digits or the very low triple digits).

I'm not disputing your overall point - Pittsburgh city does not have a surfeit of new housing stock available for new arrivals - but it seems to me that you're greatly overstating how unusual the situation is.

In fact, your bit about Insulbrick is an unintended display of this. Old Pittsburgh houses are covered in Insulbrick and aluminum siding because there was enough wealth to invest in improving the old housing, even if we sneer at their poor taste now. By contrast, in central NY state, you see lots of old houses in their original clapboard, not because the owners had better taste than mill hunks, but because they never had the money to upgrade.

Wednesday, July 18, 2012 2:21:00 PM  
Blogger C. Briem said...

I didn't think it was worth getting into, but we have objective benchmarking of the housing 'age' statistic. I'll dig those up, but Pittsburgh almost always stands out with some exceptions such as Boston. Again, numbers of houses pre-1850 does not really get at it at all. The Pittsburgh 'old' is really more driven by the minimal to nonexistant new housing over successive recent decades. As for central NY state.. it never makes sense to benchmark urban areas against rural places.

As for occupancy trends. Sure, I know there are some examples of old occupancy permits being dug up that might be missed in the data.. but as trend the policy in the city has been to seriously down-zone most housing. The 12 units allowed in say some Friendship structures by exception are not being approved any longer. If anything I bet occupancy trends are net taking units out of the city market.

Overall. I really think I am understating the uniqueness of Pittsburgh's situation. But if you want to dig into the state of housing in the city and county (and if anyone wants to argue the Braddock situation is not truly exceptional...) the first link had our longer report on affordable housing supply here.

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