With or without Amazon’s HQ2, Hazelwood real estate starting to sell
Plus, region’s housing markets could get boost from looser mortgage regs
Real estate speculators have been turning up the heat in Hazelwood as rumors fly that the online giant Amazon could relocate its second headquarters there.
But even if HQ2 goes elsewhere, the chairman of Pittsburgh’s largest real estate company, Howard “Hoddy” Hanna III, believes it’s only a matter of time before other businesses jump at the opportunity to start building near the 178-acre Hazelwood Green site.
“If I were looking to see what in Western Pennsylvania is going to be the breakout community in the next two years, I would have to say Hazelwood,” said Mr. Hanna, chairman of O’Hara-based Howard Hanna Real Estate Services.
With 262 branch offices in eight states, the family-owned real estate company is the No. 1 home seller in Pennsylvania, Ohio and New York.
The company reported $18.4 billion in completed sales in 2017 and Mr. Hanna projects sales this year will be around $20 billion based on anticipated home value increases, most notably in Pittsburgh and southwestern Pennsylvania.
He expects more new construction starts than this region has seen in 12 years, thanks to the loosening of bank rules related to residential mortgages and new construction lending.
Low mortgage rates have been stimulating construction activity and existing residential home sales across the country. The National Association of Realtors reports first-time buyers made a strong comeback in 2017, accounting for 35 percent of all buyers after the previous year’s near all-time low of 32 percent.
Many of the best performing communities in the Pittsburgh region last year and those with the brightest outlook this year were familiar names — basically the same city and suburban neighborhoods that typically rank high in number of homes sold and price appreciation.
Once again, the Lawrenceville and Strip District area ranked No. 1 in overall growth of real estate sales and increased sales volume last year — same as in 2016, according to West Penn Multi-List data provided by Hanna Real Estate.
East Liberty and Highland Park properties also had price appreciation of about 7 percent. Another big growth area for sales activity was Greenfield, mainly because it’s on the border of Squirrel Hill and Oakland.
But prior to Hazelwood being pegged as a potential site for business development, there was hardly a stampede to buy real estate in the struggling community four miles east of Downtown along the northern shore of the Monongahela River.
The Hazelwood Green site, which had previously been an old steel mill, is among 20 properties being offered as possible sites for Amazon’s quest for a second headquarters. In 2002, the Claude Worthington Benedum Foundation, the Heinz Endowments and the Richard King Mellon Foundation came together to purchase the property for $10 million.
The site took on the name Almono after the first three syllables of Pittsburgh’s three rivers. The partnership changed the name of the site to Hazelwood Green in October to recognize the former steel mill and its connection to the Hazelwood community.
According to data from West Penn Multi-List, home prices in Hazelwood actually were headed downward. The average sales price for a home in Hazelwood last year — $50,890 — was nearly
8 percent lower than the 2016 average sales price of $55,182.
But the 30 homes sold in 2017 more than doubled the 14 sales recorded in 2016. The volume of sales in Hazelwood also doubled from $772,550 to $1.5 million over the two years.
One New York-based investor, Swift Creek SFR Lemieux, recently spent $1 million to buy 18 properties in Hazelwood clustered around the Hazelwood Green site. Of those properties, most were assessed between $8,600 and $14,300 for tax purposes. Swift Creek spent $54,235 to buy 16 of the properties, $5 for one and $80,000 for another house blocks away from the others.
“I think they probably took a bet that Amazon might end up there, but investors I have seen buying in Hazelwood are buying based on them seeing Second Avenue getting a bit nicer,” Mr. Hanna said. “A couple of new stores have gone in there, plus the Hazelwood Green project where Amazon might go. Carnegie Mellon University has started a new building there.
It doesn’t hurt, he said, that people can still buy houses there for $8,000 or $10,000.
“You’ve got a lot of housing stock there,” Mr. Hanna said. “There’s a lot of vacant land where houses were torn down. You’ve got great accessibility to Downtown and Oakland, and this technology industrial park will have something there that will bring in high-paying jobs.
“If Amazon comes, all tides will rise on everything,” Mr. Hanna said, adding that the Seattle company has indicated it will spend $5 billion on development around its chosen site and bring 50,000 jobs.
“If Amazon doesn’t come there, somebody else will,” he said. “If not the universities or the health system, people are going to build there.”
While city neighborhoods such as Shadyside, Squirrel Hill, Point Breeze and others in the East End continued to see home values appreciate last year, traditional suburban communities that also had increased volume and increased sales were Adams Township, Cranberry and North Strabane. Mt. Lebanon also continued to be a consistent performer.
The strengthening economy, steady job growth and mortgage rates of around 4 percent helped fuel a modest gain in existing home sales across the nation in 2017 compared to 2016, according to data from the Washington, D.C.-based National Association of Realtors.
The median home price of $246,700 for existing home sales in 2017 rose 0.5 percent compared to the median price of $233,900 for existing homes in 2016.
“What kept sales from a meaningful breakout is what’s been slowing the market for the last couple of years — lackluster supply levels that continue to limit choices for buyers and weigh down overall affordability,” said Adam DeSanctis, spokesman for the NAR.
Howard Hanna Real Estate Services closed a total of 97,005 sales last year. Mr. Hanna said because of the improved climate for mortgage lending, he expects the company to close about 103,000 sales this year.
He predicts the Federal Reserve Bank will raise interest rates about 75 basis points this year, which could be a shock to home buyers accustomed to the low rates that have prevailed for more than a decade. But there are some silver linings.
“When you have a low supply of properties, the demand is going to be great whether interest rates are 4 percent or 4.5 percent,” he said.
Another factor that could create more demand for housing is the deregulation that has been occurring in the lending industry.
“This time last year if you didn’t have a 640 to 650 credit score, you probably were not going to get a mortgage,” Mr. Hanna said. “The Consumer Financial Protection Bureau had certain guidelines you had to come under and if a lender closed on a loan that was below that credit score, the lender was penalized by the CFPB for giving someone a mortgage they couldn’t afford.
“Those same regulators have loosened the standards so that pretty much a 600 to 620 credit score would qualify for a mortgage,” he said.