Is lower demand for some city real estate a trend?
David Mike and Deanna Zaccagnini celebrated the purchase of their Lawrenceville home four years ago by getting engaged in front of their third- floor window with a city view on the day they moved in.
“We loved living in the heart of a vibrant community,” Ms. Zaccagnini said.
Lawrenceville had a lot to offer the socially active young couple in terms of entertainment and nightlife. But that was before their two children and two Chihuahuas came into the picture, and before the COVID- 19 pandemic made them keenly aware of how much they had outgrown the house.
They recently bought a home in Highland Park that gives them twice the interior square footage and an acre of land. They expect to sell the row house on 45th Street to another couple who want to live close to all the action — even if the action is on pause right now because of the coronavirus.
But while it has only been a few weeks since the Zaccagninis listed their four- bedroom, three- bathroom unit for sale at $ 485,000, they’ve begun to realize that Lawrenceville properties aren’t flying off the shelf like before.
Ten years after the former workingclass community took a leading role in the biggest real estate boom in Pittsburgh history,
Lawrenceville for the first time is experiencing an overabundance of houses for sale, and it appears that the city’s hottest real estate market is showing signs of cooling down.
Recent data from the real estate listing service West Penn Multi- List shows that other city neighborhoods are suffering from lower demand from homebuyers, too. Sales also have begun to slow for condominiums in Downtown and the Strip District, and for housing located on the South Side and Central North Side.
Demand for single- family homes in suburban communities like Mt. Lebanon, Upper St. Clair and Shaler has soared in recent months.
“Clearly these numbers show fewer people have a desire to buy houses in heavily populated urban areas,” said Howard “Hoddy” Hanna III, chairman of O’Hara- based Howard Hanna Real Estate Services. “That may stem from fewer people working [ in] Downtown and more people working at home or remotely.”
The COVID- 19 crisis has led to a well- publicized spike in demand for housing in suburban communities outside big cities like New York City. Many people living in close quarters in urban environments are seeking ways to relocate to quieter places away from crowds.
Just how the trend might impact Pittsburgh isn’t clear yet.
“Demand has definitely softened [ for city real estate],“Mr. Hanna said. “I don’t know if it’s because people don’t need to live [ in] Downtown or they prefer homes with more land in the suburbs. But four months doesn’t make a trend. Clearly, New York has a trend. But I’m not sure if we have one yet.”
Unsold inventory
The number of active residential real estate listings in Lawrenceville in the month of August stood at 228. That represented the highest number of homes available for sale in any single month in that neighborhood since at least 2015, according to West Penn Multi- List data.
In May, 139 homes were on the market there.
Inventories of unsold homes also have begun to grow in other popular city neighborhoods that until recently have seen robust sales activity over the past decade.
Central North Side, Downtown, the South Side and Lawrenceville combined have experienced a collective increase of 16.8% in unsold housing inventory and posted a combined drop of 11.2% in sales this year as of July 31, compared to the same time frame last year, according to a Trendgraphics real estate industry report that aggregates all sales data from real estate brokers in the Pittsburgh region.
“The last decade has been the most extraordinary period for Pittsburgh real estate,” said Mike Netzel, operating partner at Keller
Williams Realty. “But tomorrow isn’t yesterday. That’s one thing we know for sure.
“Right now, we are in the middle and we don’t know where that is.”
It’s hard to say how much of the falling demand for city real estate has to do with families re- evaluating their quality of life in the COVID19 era.
John Petrak, executive vice president of the Realtors Association of Metropolitan Pittsburgh, said he’s not surprised that city home sales are lagging.
He was anticipating that a slowdown would occur when the city increased its real estate transfer tax by another 0.5% in January 2019, bringing the total transfer tax to 5%. For a $ 400,000 home, that amounts to a $ 20,000 tax bill that the homebuyer and seller must split at the time of closing.
Municipalities outside the city, such as Ross, charge a 2% real estate transfer tax. The buyer and seller would split an $ 8,000 tax bill for a $ 400,000 home purchase.
City neighborhoods where home prices have greatly appreciated in the past decade could be hurt by the higher tax. Lawrenceville has become one of the city’s priciest neighborhoods, and in recent years, some say, it has become overdeveloped.
“The market is so strong in most communities in Allegheny County that if a house is in good condition and priced right, it will sell within 30 days,” Mr. Petrack said. “Lawrenceville has become oversaturated and priced out of reach for many people and the increased deed transfer taxes have added an additional burden.”
Taste for suburbia?
Julie Welter, a Coldwell Banker real estate agent, has sold more homes in Upper St. Clair than any other agent this year.
She has sold over $ 10 million worth already compared with $ 4.4 million that she sold last year through September. She can attest to the migration of buyers looking for larger spaces for home offices and more rooms for the family to spread out.
“This has been an extraordinary year for Upper St. Clair sales,” Ms. Welter said. “But it’s not just Upper St. Clair. I’m seeing a lot more people — younger than I’d expect — move to the suburbs. Some are in their 20s, and that’s not a typical thing.”
Demand for homes outside the city in a number of suburban communities has spiked in the past year.
There are nearly 35% fewer homes on the market in Mt. Lebanon now than there were last year. Home sales in that community are up nearly 15%, according to Trendgraphics.
The North Hills community of McCandless had more than 43% fewer homes for sale at the end of August than last year; Monroeville listings were down by 57%; and Shaler, with 61% fewer homes for sale in August, had the largest drop in inventory on the market — probably due to its relatively affordable average sales price of $ 227,162.
The declining number of homes sitting on the market in those communities is a reflection of higher sales activity.
In July, the National Association of Realtors, based in Washington, D. C., began tracking home sales in 50 metropolitan areas around the country and found that in 28 metros the number of home sales in the cities has declined relative to suburban areas outside the cities.
Pittsburgh wasn’t in the sample group.
Cities like Chicago, Boston and Philadelphia are among those where the share of home sales in the cities has declined relative to suburban areas outside the cities.
But in some cases, the city numbers already were falling before COVID- 19 became a factor.
“For some cities like Chicago, COVID- 19 didn’t create a trend for declining home sales in the city,” said Gay Cororaton, director of housing and commercial statistics at the National Association of Realtors. “Maybe it accelerated the decline that was already in place.”
One notable exception was Salt Lake City, which is experiencing higher demand for homes in the city.
‘ Value is still there’
Many Lawrenceville properties saw triple- digit price appreciation during the gold rush of the past decade in that neighborhood, which helped earn Pittsburgh the reputation for being the No. 1 city for real estate investors in the country.
These days, Lawrenceville resident Erin Andrzejewski said she sees more of her neighbors leaving to relocate to leafy suburban communities where the homes aren’t so close together and they have backyards.
“It’s something we considered, too, but at the end of the day, our business is in Lawrenceville and we love living in Lawrenceville,” said Ms. Andrzejewski, 31, owner of the Pittsburgh Sandwich Society food truck.
Tim Gyves, a real estate agent at Re/ Max Select, has two homes listed for sale in the neighborhood. He said the days when people lined up to pay six figures for a gutted shell of a building appear to be over and that buyers have way more options now than before. Sellers there are competing with newly constructed homes, newly renovated homes as well as 100year- old existing row houses and single- family homes.
“I don’t see the appeal of Lawrenceville going away,” Mr. Gyves said. “But Lawrenceville homes are typically not big, and if you are stuck in the house for the next six months and you need more room or you want a backyard, you may be packing your bags and moving to Wexford or Mt. Lebanon.
“I’m not hearing real estate agents say homes in Lawrenceville are overpriced, and I don’t see any desperate large cuts in prices,” he said. “Long term, the value is still there.”
Ken Nowosielski, a Hampton resident, has been trying to sell a home that he inherited from his mother on 45th Street in Lawrenceville for $ 450,000 since December 2018. He said he’s getting a bit concerned.
It has recently been under contract twice, and both sales were canceled for COVID- 19related reasons. One buyer was unable to sell a house in Massachusetts; the other buyer lost a job.
“We have not lowered the price,” Mr. Nowosielski said. “The offers we’ve had were in line with what we wanted for the house. The thing now is we are competing with a lot of new construction.
“[ There are] individuals who want new construction, and you’re not going to move them away from that,” he said. “But [ there are] also individuals who like the oldschool charm of an older home. We added two parking spaces in the backyard, and in Lawrenceville, that’s a great feature.”