Some Good News (Pittsburgh, Ashland: foreclosure, credit, houses)

[WILWRadio]

Forty Strongest U.S. Metro Economies: Pittsburgh, PA - BusinessWeek

[Hopes]

Wow! Pittsburgh ranks 5th nationally for house price change year over year!

[Fiddlehead]

Originally Posted by Hopes

Wow! Pittsburgh ranks 5th nationally for house price change year over year!

Better buy now, or you'll all be priced out forever!!! Hehe....

[BrianTH]

Originally Posted by Fiddlehead

Better buy now, or you'll all be priced out forever!!! Hehe....

We don't take kindly to that sorta talk around here, stranger.

[Fiddlehead]

Originally Posted by BrianTH

We don't take kindly to that sorta talk around here, stranger.

Good for you! If you hear it from the RE sector, fire up those burning torches!

But seriously, the other housing thread has opened my ossified mind to the notion that long-term declines or stagnation brings their own problems (e.g. flight of capital, blight,etc.). That said,you can certainly count yourself lucky that Pittsburgh seems to have dodged the bubble bs (except for the systemic credit freezup), so can appreciate as the other are paying their dues.

Head over the Oregon forum for a discussion about Bend, Oregon. A real outdoor mecca that was bubble central, then "jumped the shark." I think there is a thread called "Are Bend Prices Dropping Yet?" that is pretty interesting reading. Imagine what that did for the wealth distribution in the town

[BrianTH]

Yep, depreciation (or a level of stagnation which amounts to depreciation after you include inflation and maintenance) brings a lot of problems too. I think ideally you would want housing prices just to be slowly but more or less steadily appreciating at an average rate not much above inflation, which minimizes the potential for harm and distortions of either sorts and has proven sustainable historically.

[Hopes]

Originally Posted by Fiddlehead

But seriously, the other housing thread has opened my ossified mind to the notion that long-term declines or stagnation brings their own problems (e.g. flight of capital, blight,etc.). That said,you can certainly count yourself lucky that Pittsburgh seems to have dodged the bubble bs (except for the systemic credit freezup), so can appreciate as the other are paying their dues.

Pittsburgh dodged the bubble AND the long term declines.

Property values only fell in steel mill towns after the fall of the steel industry, not throughout the entire Pittsburgh region.

My parent's house increased in value during that time along with houses in most areas.

[Fiddlehead]

Yes, that model seems good over the long-term. It provides an incentive for home ownership and good stewardship of home and neighborhoods.

Now contrast that with this. A guy buys a home in Marin County, CA $50k in 1970. By 2000, when he is thinking about retiring, it is going for $400k, or increased 800%, while wages have increased some fraction of that. So, this person is doing pretty darn well. Now, add in the bubble effect. The home triples in value in 6 years to $1.2M. Said retiree is now a millionaire, but median wages have not even risen enough to support even the $400k valuation. So, said retiree sells the house at the peak, retires to Ashland, Oregon, pays cash for a $750k home, a hummer, and lives like a king. Meanwhile, the idiot speculator (or poor bamboolzled fool) who bought the home thinking it should go to $2M in a few more years sees the writing in the wall and mails the keys to the bank or goes into foreclosure. Banks buckle, and you and I foot the bill. ...And a couple years forward, when the house price has now "fallen" to $900k, realtors are crowing it is a once-in-a-lifetime chance to buy! AAAARRRRRGGGGHHHH!!!!!

I will take the Pittsburgh story any day!!

[Hopes]

Originally Posted by Fiddlehead

Now contrast that with this. A guy buys a home in Marin County, CA $50k in 1970. By 2000, when he is thinking about retiring, it is going for $400k, or increased 800%, while wages have increased some fraction of that.

An average Pittsburgh house with four bedrooms and three bathrooms would have increased to the 150k-200k range from 1970 to 1990 in most suburban neighborhoods.

Originally Posted by Fiddlehead

So, said retiree sells the house at the peak, retires to Ashland, Oregon, pays cash for a $750k home, a hummer, and lives like a king. Meanwhile, the idiot speculator (or poor bamboolzled fool) who bought the home thinking it should go to $2M in a few more years sees the writing in the wall and mails the keys to the bank or goes into foreclosure.

They're both idiots because the 750k house wasn't really worth that either.

[BrianTH]

Yeah, the person to get really miffed about is the one who sold out at the top of the bubble then rented somewhere. I take some comfort in knowing that person is very rare.