Wednesday, January 30, 2008

2nd Order Impacts of Housing

Pittsburgh has escaped the worst of the first order effects of the bursting of the housing bubble as the city and region never really experienced the bubble. Good homes in decent school districts were and still are available for less than twice the area median household income. Pittsburgh is not alone in escaping the burst, as other Rust Belt cities never saw the boom:

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.

However the second order effects of the bubble burst are being felt in Pittsburgh even if this region never got too frothy. The Post-Gazette reports today of the real estate industry job losses:

The U.S. mortgage meltdown is roiling Pittsburgh's western suburbs in unexpected ways. Jobs, not homes, are being lost.

Pittsburgh-area companies eliminated 1,590 mortgage-lending and consumer finance positions between the end of 2005 and the end of 2007 -- the 10th highest drop among any metro area in the country, according to Moody's

Many of those layoffs occurred along the Parkway West, in towns such as Moon and Robinson, Coraopolis and Green Tree, where companies have aggregated to provide appraisals, title insurance, closing and deed preparation services for mortgage lenders nationwide.

These are decent to well paying jobs; I interviewed for a couple of them in 2003 and 2004 and they were paying above median wages for people straight out of college. Pittsburgh is doing better than other Rust Belt cities but job growth has been slowing down in the region faster than the national slow down.

Ahh, the joys of integrated national economies so even when a region did not go crazy, the second order effects impact the region anyways.

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