An influx of young professionals, mortgage rates hovering around 5 percent and rising rental costs will spark an increase in first-time homebuyers in the Pittsburgh market this year, predicts the CEO of Howard Hanna Real Estate Services.
"Homeownership is alive and well, and it's going to rebound even more this year for first-time buyers," said Howard "Hoddy" Hanna III. The O'Hara-based firm is the fourth-largest real estate company in the U.S. with sales volume of nearly $10 billion in 2013.
"I see this trend nationwide, but certainly in Pittsburgh because if you look at the last two years, we have had more people moving in than moving out," he said. "The people moving in are moving here for relatively higher-paying jobs in technology, medicine and research.
"We're not as industrial-based as we were, and I don't believe the people moving in will want to continue renting when they can buy today. Unlike a lot of regions around the country, we have affordable housing. In a lot of areas in the country, the first-time buyer can't buy because the prices are too high."
The average home price for the Pittsburgh region hovers around $160,000, according to the most recently available data from RealSTATs, a South Side-based real estate information service.
The greatest concentration of first-time buyers, Mr. Hanna believes, will be looking for homes in city neighborhoods such as Highland Park, Regent Square, Point Breeze and Greenfield. Morningside and Stanton Heights also are in the affordable price range mix right now, he said, adding that the sweet spot for first-time homebuyers in this region is between $125,000 and $300,000.
"In the East End, you've got more single buyers than we've ever had," Mr. Hanna said. "Single women tend to buy a lot more than single men."
While the East End is hot, Mr. Hanna said suburban areas like Mt. Lebanon and Oakmont remain strong attractions for first-time buyers who want to build roots in family-oriented communities.
Many first-time buyers, who tend to be in their mid-20s to late 30s, want to live within walking distance of shops, restaurants and other amenities.
"I have a sense ... that housing growth tends to follow commercial growth, whether it's suburban or whether it's in town," Mr. Hanna said. "When you have a vibrant Main Street, the housing gets better. I've seen so many places where they've tried to make the housing better, but there's no Main Street yet.
"Just about every place that gets hot, commercial was there first. The South Side got hot after Carson Street got busy."
The federal tax credits offered to first-time homebuyers in 2008, 2009 and 2010 led to a spike in homebuying, but the percentage of first-time homebuyers with Howard Hanna has fallen from a high of more than 50 percent in 2009 and 2010 to about 33 percent last year, said Mr. Hanna, whose company closed a total of 52,827 home sales in 2013.
He said the region's rising rental rates benefit the housing market.
In October, the average rental rate within 20 miles of the center of Downtown for all bedroom sizes had gone up 17 percent to $900 a month from $770 a month in July 2009, according to Jon Pastor, CEO of Rent Jungle, a North Shore-based company that analyzes rental housing trends nationwide.
"That is fairly typical nationwide," Mr. Pastor said, "although some cities do better than others."
For instance, rental rates in Cleveland for the same time frame actually went down from $750 a month to an average $740 per month. Rental rates in San Francisco, on the other hand, shot way up from $1,800 a month to $3,000 during that time frame.
If there is a perfect storm for first-time homebuyers in Pittsburgh this year, there could be one missing element: inventory.
The number of houses for sale in almost every price range is low, according to the February report from West Penn Multi-List Inc. New listings from January 2013 to January 2014 decreased 13 percent from 2,543 homes to 2,210 homes. Residential homes placed under agreement increased 5 percent to 2,664 homes vs. 2,529 homes last year.
"We have the buyers, but where are the sellers?" asked George Hackett, president of West Penn Multi-List and president of Coldwell Banker Real Estate Services in Pittsburgh.
"The market is very favorable for sellers right now. Homes are selling more quickly and for a higher average price because we have a decreasing number of homes for sale."
Mr. Hanna agreed the lack of housing inventory in the $125,000 to $275,000 range may be a challenge for first-time buyers.
"There's not a lot of existing product, and it's hard to get developers to develop new properties in this price range," he said. "But the closer you get to $275,000, you can. We do anticipate prices going up again this year."
Tim Grant: firstname.lastname@example.org or 412-263-1591.