HOUSING STOCKS: This Pittsburgh neighborhood delivered the second-best return on investment nationwide
For homebuyers fortunate enough to foresee Lawrenceville’s future glory, the payoff has been worth the wait: Among 15,000 U.S. housing markets researched by The Business Journals, Lawrenceville ranked as only one of two locations — the other being Winton, California, to the east of San Francisco — to deliver a greater than 2,000% return on investment for the typical buyer over the past decade. That’s about 20 times what the median return has been during the same span for housing markets nationally.
And Sager expects prices in Lawrenceville will keep climbing for the right product that offers quality design and beautiful fixtures.
“The buyer pool is not minimal,” she added. “The reason why I think you don’t see more sales in that price range is just that the product doesn’t exist.”
Adam Longshore, a Keller Williams Realty agent with several listings in Lawrenceville, said the buildup was slow and steady before things exploded about three years ago in Lawrenceville, which totals three wards in size along the Allegheny riverfront and is close to the new autonomous vehicle companies setting up along the city’s Robotics Row.
“Everyone wants to know where the next Lawrenceville is going to be,” Longshore said.
The Business Journals’ analysis tracked home values from the depths of the recession in August 2009 through August of this year, and applied a hypothetical scenario in which homebuyers entered the market a decade ago with a 10% downpayment to make a purchase. In Lawrenceville in August 2009, that downpayment would have equaled about $7,000 for the median home value at the time of $69,800, according to data provided by Zillow Group (Nasdaq: Z). As of August, the area’s median home had appreciated to $217,200 in value, a $147,400 gain for our hypothetical homebuyer.
Nationally, the returns to homebuyers over the past decade have been almost universally healthy. Among the thousands of ZIP codes covered in The Business Journals’ study, the median home in some 12,885 of those locations appreciated in value, with a median price change of 31% over a decade. In the return-on-investment scenario detailed above, the median return equated to about 214% for buyers who entered the market in August 2009.
Some 320 neighborhoods surpassed the 1,000% ROI threshold over the period analyzed, with many areas ravaged by the most-recent recession and housing downturn seeing some of the strongest rebounds in value during the subsequent 10 years. For example, 191 of those communities were located in either California, Colorado or Arizona, where a surplus of housing inventories at the recession’s onset led to a flood of foreclosures and slashed home values.
PITTSBURGH’S MOST WANTED
Back in Pittsburgh’s Lawrenceville area, real estate agent Longshore attributed the neighborhood’s popularity to a combination of great proximity to a “Robotics Row” of major tech employers, well-planned revitalization efforts by the city and a solid stock of single-family homes dating back to the late 1800s and early 1900s. He said the neighborhood’s Butler Street retail district has become a major draw, adding the area is about to see its first $1 million home hit the market.
“That $250,000 (median) home probably needs a little elbow grease,” he said, a nod to the neighborhood’s fast-rising prices.
In dollar terms, the neighborhood to see the greatest appreciation over the past decade was New York’s 10021 ZIP code, home to Park Avenue and a median home value of $15.4 million as of August. The median home in that neighborhood appreciated by about 37% over that span, enough to add about $3 million in paper profits for a typical home purchase a decade ago. Rounding out the top three dollar-gainers were Beverly Hills 90210 (up $3.2 million, or 130%, over the decade) and the Silicon Valley suburb of Atherton, California (up $3 million, or 100%).
Of the 2,000 or so neighborhoods to see home values stagnate or decline over the past 10 years, the worst fallout was concentrated in the nation’s Rust Belt and in particular the state of Illinois. Among the bottom 25 performers, eight were in the Land of Lincoln, with another six located in Missouri.
Yet Lawrenceville’s explosion in residential values comes with plenty of ambivalence in the community.
David Breingan, executive director of Lawrenceville United, a resident-driven community organization, noted some of the unsavory aspects to come along with the neighborhood’s boom.
Along with the displacement of long-time renters in the neighborhood, he said there’s also been an increase in predatory practices.
He noted one example in which a senior home owner was reported to the city for chipped paint on her home and cited as in violation, a move he expects was motivated by a real estate prospector working to manipulate buying a house from a vulnerable home owner on a fixed income.
“The hotness of the market is causing some of these activities that are really threatening people like her,” he said. “Not everyone is benefitting from that accumulation of wealth.”
The neighborhood is pursuing a number of strategies to avoid more negative impacts of the changes, including new inclusionary zoning and a community land trust, added Breingan.
But such strategies are trying to catch up to what’s been a fast-paced change.
“As quickly as it happened, I don’t think anybody saw that this was coming,” he said.
In Pennsylvania, six of the 10 communities with the highest return on investment for the typical buyer over the past decade, were in the Pittsburgh.