Real estate here defies U.S. trend
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Pittsburgh's residential real estate values have grown in defiance of the housing downturn that has crippled other metropolitan areas.
Pittsburgh is among several cities, including Rochester, N.Y.; Gary, Ind.; Salt Lake City and Trenton, N.J., that have shown rising or stable home prices over the past year despite a broad decline in existing home sales, according to the National Association of Realtors.
Median sales prices for single-family homes in Pittsburgh increased 6.1 percent from a year ago, while some cities in Florida and California posted double-digit declines in sale prices during the same period, suggesting that home prices have fallen most dramatically in areas where the speculative frenzy was hottest.
"Pittsburgh doesn't have a hangover because it wasn't at the party," said Dr. Marc Louargand, president of the American Real Estate Society and a principal with Saltash Partners LLC in Hartford, Conn.
Several markets that analysts once saw as the hottest actually recorded some of the most sobering results, including Palm Bay/Melbourne, Fla., which saw a 12.4 percent decline; Sacramento, Calif., where prices fell 10.5 percent; and the Sarasota/Bradenton, Fla., area, which experienced a decline of 10.4 percent.
Markets that have taken the hardest hit had a large supply of housing stock and plenty of speculative investments.
"Those all combined to create the current weakness," Dr. Louargand said. "The speculative buyers are out of the market, and there's excess supply."
Real estate values here are performing as prices would in a normal market, according to Walter Molony, a spokesman for NAR in Washington, D.C. Prices usually rise about 1 or 2 points faster than the rate of inflation.
One of the main factors in Pittsburgh's steady growth in home values is that the median price has risen gradually over time, which helps to preserve its affordable home prices.
"Our view is that the Pittsburgh area is underpriced by national standards," Mr. Molony said.
The national median existing single-family home price for the third quarter of 2007 was $220,800.
For Pittsburgh, that figure was $127,700.
Michael J. Sichenzia, chief operating officer of Dynamic Consulting Enterprises in Deerfield Beach, Fla., a firm that specializes in renegotiating mortgage debt for distressed homeowners, said it may not be that Pittsburgh has done so well because people find the city a more desirable place to live or have better job opportunities here.
"It may well be a statistical phenomenon resulting from the fact that there was not a speculative market there like there was everywhere else," Mr. Sichenzia said.
"The bubble effect wasn't as bad because the Pittsburgh market came into the game later and, because of that, the gate didn't swing open as wide."
But does that mean Pittsburgh will fare better than those cities with depressed real estate prices in years to come?
The overall tightening of credit will fall disproportionately on the shoulders of first-time home buyers, making it harder to get mortgages in Pittsburgh and elsewhere, Mr. Sichenzia said.
But Mr. Molony had a brighter outlook.
He said NAR data show Pittsburgh's continual real estate growth is driven by respectable job gains. Home prices in Pittsburgh from 1990 to 2006 have grown 62 percent. Average income in Pittsburgh during the same period rose 93 percent, he said, adding that 4,400 jobs were added to Pittsburgh's economy last year.
"You could be seeing stronger-than-average price appreciation in Pittsburgh in 2008," Mr. Molony said.
"It would be due to a healthy local economy, affordable home prices, job growth and historically low interest rates continuing."
First Published November 29, 2007 12:00 am