A recent headline caught more than a few urban advocates off guard. “American’s Fleeing Big Cities.” According to a new census report nearly every large metropolitan area had more people move out than move in from 2000 to 2004.

Working in real estate leads to a natural interest in trends such as these. It’s hard to tell whether Pittsburgh can be included in this category. The first question is whether Pittsburgh is a big city to be fleeing from or a small town to be fleeing to.

Folks have been leaving Pittsburgh (along with Cleveland, Buffalo, Youngstown) for decades now, and while there is incidental evidence that people are now coming in, census data hasn’t yet showed that (while the losses continue to lessen).

The reason given for fleeing the biggest cities, high cost, certainly aren’t present here. That at least leaves the door open for Pittsburgh to be a place to flee to, if she plays her cards right.

The conundrum is that traditionally it has been places that people are fleeing to that experience the high real estate prices. Today it’s the places being emptied. About 60,000 people left San Francisco between 2000 and 2004, Chicago experienced similar numbers. New York City lost some 210,000. Los Angeles had losses topping 110,000.

Richard Florida, (fomer Pittsburgher and) a professor of public policy at George Mason University told USA Today that smaller, wealthier households are replacing larger families in many big metropolitan areas.

“That drives up housing prices even as the population shrinks, chasing away even more members of the middle class.”

That may be, but the question of how long can prices continue to rise when people are leaving needs to be asked. In most cities, smaller, wealthier households moving in marks a paradigm shift and poses new questions for economists. It also poses questions for the direction of the markets in places where former urbanites are moving to. It isn’t the working poor as much as the young and upwardly mobile who are choosing to relocate outside major metropolitan areas.

On the subject of trends, there are two other issues that are sure to come into play. The first is the high cost of fuel. What is that expected to do to housing markets? My inclination is it will favor cities or transit communities. Yet the fuel costs probably aren’t going to increase enough to warrant the price of urban Boston. The combination may just make life harder without having a net impact favoring suburban or urban geography.

The second is global warming. We know it’s happening whether or not it’s caused by humans. This may not in itself favor urban or suburban locations, but is sure to favor regions. Where? Thoughts?

DiBruno, DeLallo, whatever. It's a great choice for a market in downtown Pittsburgh. DeLallo Bros. has been chosen as the market that will be located in the former Lazarus department store in downtown Pittsburgh. Initially the possible outlets mentioned were Giant Eagle and Whole Foods, but in the end it was the local chain that won out. DeLallo is based in Jeanette. I had previously visited one of their stores near Greensburg. It reminded me of DiBruno Bros., a store that started in the Italian Market District in Philadelphia. I previously suggested something similar would be a good match for downtown Pittsburgh (DiBruno has a location on Chestnut Street in Philly--an area with many hotels and retail stores). From my small sample, DeLallo has great products and I feel the store is the perfect match for downtown Pittsburgh. It's sure to please downtown residents, office workers and vistors.

Visit DiBruno
Visit DeLallo

With a lot of out-of-towners looking for homes in Pittsburgh, I get a lot of questions asking just what a particular neighborhood is like. You can only tell so much from a map and a photo of a house.

There's really no substitute for going there, however, but a picture is still worth more than a map and photo. I've begun a site at pbase that will allow me to upload photos of our neighborhoods on an ongoing basis.

In anticipation of my persistence, the site contains a small fraction of what will eventually be there, but it's enough to help begin to provide some snapshots of Pittsburgh's great neighborhoods Link

PMI Mortgage recently listed Pittsburgh as one of the nation's least risky housing markets along with San Antonio, Cincinnati, Indianapolis and Memphis. This echoes earlier reports inluding Smart Money magazine which called out city "undervalued."

These are the exceptions. PMI says forty-eight of the nation's 50 largest metropolitan statistical areas (MSAs) face a greater risk of declining home prices this quarter, adding the continued strength of the national and local economies suggests that in the absence of an economic shock, the once red-hot housing market will cool gradually. Appreciation has slowed in nearly half of the MSAs as compared to last quarter. Affordability remains a problem with eight MSAs registering affordability levels considered low by historical standards, due to appreciation and higher interest rates.

U.S. Market Risk Index scores increased for all of the top 50 MSAs except Chicago, IL, whose score decreased one point (New Orleans was not scored this quarter due to the catastrophic impact of Hurricane Katrina). Fourteen of the top 50 MSAs now have risk scores above 500, meaning they face a 50 percent or greater risk of home price declines in the next two years, up from 11 MSAs last quarter. The average score has increased from 261 last quarter to 287. The biggest change was in Minneapolis, MN, which gained 90 points, taking it to a score of 350 and up two spots in the ranking to No. 19.

Other U.S. Market Risk Index trends include:

-- In addition to Minneapolis, MN, MSAs that saw significant increases in risk were Virginia Beach, VA (+65 points to 274), Baltimore, MD (+62 to 279), Newark, NJ, (+61 to 427), New York, NY (+58 to 506), and Washington, D.C., (+56 to 401).

-- Riverside and Oakland, CA traded places, making Riverside No. 5 and Oakland No. 7. San Francisco and San Jose, CA also traded places, making San Francisco No. 10 and San Jose No. 11. Other than that, the top 15 are the same as last quarter with risk still clearly focused on the coasts.

-- There are now eight areas with Affordability Index scores below the vulnerability threshold of 70: San Diego, Santa Ana, Riverside, Sacramento, Oakland, and Los Angeles, CA, and Fort Lauderdale and Miami, FL. Long Island (Nassau-Suffolk), NY, San Jose, CA, and Tampa, FL are also considered potentially vulnerable with scores between 70 and 75.

-- While slowing, appreciation remains high by historical standards. Phoenix, AZ, Orlando, Fort Lauderdale, Miami, and Tampa, FL, Washington, D.C., Virginia Beach, VA, and Los Angeles, CA saw year-over-year appreciation of more than 20 percent.

The PMI report coincided with numbers from the National Association of Realtors showing second-home buyers now made up 40 percent of the market. The bulk (27.7 percent) of these are purchased for investment purposes.

The San Francisco Chronicle noted however that while risk for that city's homebuyers may be increasing, in the past 20 years the return for any five-year period ranged from a gain of nearly 50 percent to a loss of about 10 percent, with a median gain of 33 percent. Those who owned their homes for 15 years or more almost never incurred losses.

Eric,

Don't you think that building all these "luxury" condos is a bit of a mistake, though? I was talking to the guys at Burt Hill, an arch firm that is in Pittsburgh (they were at some career fair thing here), and they were talking about how they're rallying to meet with the mayor and the planning dept etc to try to make a move to get these units to be more affordable. I mean, as a native I know where the cheap and cool neighborhoods in the city are, and would know exactly where to move to if I were to move back, but most of my fellow friends wouldn't, and the first thing they would ask is about downtown because it's in the center and close to everything. So shouldn't there be some kind of housing that those of us who are low on the totem pole salary wise should be able to afford? This is a problem Philadelphia is experiencing, too, and if I come back to Pittsburgh and find it's been condo-fied the way Philly has I'm going to be angry. One of the great things about Pittsburgh is that it hasn't jumped on that bandwagon, until now. But at least they're building housing downtown finally. Ack, prisoner's dilemma.

Amanda

Amanda-

The way I see it there wasn't any housing downtown before the luxury condo's came. Housing in general downtown will bring retail and make downtown better. That will make living in the areas around downtown without a car more practical and attractive. So, while a mix may be better, the condos themselves are good in my opinion.

In the short-term, however, a lot of people think all these new rental units are hurting the small landlords. That's likely temporary too. It could play out that the rental units are sold to homeowners who want to live near downtown. That would be good for the neighborhoods.

The downside? Well, in the last 50 years lower income people had to travel to the suburbs for jobs. In the future they may have to travel to the city. However, because the entire thing can't be developed at once, there will always be more of an economic mix and wide price range in the city.

An energetic, expensive city is better than an empty, cheap one. Is there a balance? I hope.

Eric

This exchange took place at the East Allegheny Yahoo Group