The More Things Change, the More They Remain the Same.
What was once true is true again: the North Hills are hot. Even as the global and regional economies are buffeted by a pandemic-induced recession, the housing market in the North Hills is performing as it did in boom times. The reasons behind this aren’t very sexy and they are the same reasons that the North Hills communities have been desirable for three decades. There are great schools. Commuting is easier than from any other part of the city. Lifestyle amenities abound.
“I can’t say there is something drastically changing but what I can say is that people are becoming more and more aware in Pittsburgh that the North Hills is the place to live,” says Kevin Mihm, realtor with Howard Hanna Real Estate Services. Mihm is one of the deans of North Hills real estate and an unabashed cheerleader for the northern communities. He says there are five reasons why people keep moving north.
“Good schools mean good resale. There’s good transportation without any tunnels. There is a good selection of housing,” Mihm explains. “The fourth thing is probably most important in the era in which we live, which is low crime. And the fifth reason is something that people find very important, which is parks and recreation. North Park is 3,000 acres and almost all of the townships have their own community parks.”
While it may be true that the fundamental attractions of living in the northern communities are unchanged since the opening of the Parkway North in 1989, it is untrue that things aren’t changing. The housing markets in the U.S. and in Pittsburgh were rocked by the mortgage crisis in 2008 but there are trends emerging that show how strong the housing market has become in 2020. Some of those emerging trends are driving activity in the North Hills, ahead of other parts of the region. Real estate professionals and home builders are seeing subtle changes to the landscape, changes that may signify a new housing boom.
The More Things Change, The More They Remain the Same
Before examining those trends that are changing the market, it is worth noting the steady foundations of the North Hills housing market. The five factors Mihm outlined have been driving home sales and new construction for 30 years. Three key elements have created the environment for appreciation and growth.
There is a bit of a “chicken or egg” element to the most important factors. While real estate agents’ mantra may be “location, location, location,” there is more than one factor that determines what a good location is. It’s hard to argue that there are more important factors than school districts and transportation. In the North Hills, the good schools came first but an infrastructure investment unlocked the potential of the housing market.
That investment, the limited access highway known as Interstate 279, led to explosive demand for homes in northern Allegheny County and southern Butler County. Opened in 1989, I-279 made it possible for suburbanites to have a 30-minute commute to Downtown Pittsburgh from as far away as Zelienople. For communities like Marshall Township and Franklin Park in desirable North Allegheny School District, the new parkway meant that residents saw commutes cut in half. During that same time period there were an abundance of small family farms that became available for development. Thousands of new homes were built in those townships over the next two decades, creating the need for new and expanded elementary and middle schools in the highly-ranked North Allegheny School District. For owners of existing homes, this influx of new residents boosted home values dramatically.
The same commuting improvements also drove new construction along the Allegheny-Butler border, providing fire for a hot housing market in Pine Township, Adams Township, and, of course, Cranberry Township. The latter community exploded during the late 1980s and 1990s, with as many as 500 new homes built in numerous years. This growth, like that in North Allegheny School District, was a catalyst for improvements in Pine-Richland, Seneca Valley, and Mars Area School Districts. As older residents of these communities aged out of their family homes, new families demanded more of the schools and the increased tax revenues provided the resources the districts needed.
These fast-growing school districts added to the appeal of the North Hills, which was also home to Hampton Township School District and Fox Chapel School District, two districts perennially ranked in the region’s top five or ten schools. The third element necessary for creating the reputation and desirable environment that the North Hills has to this day was available land. Since the early 2000s, there has been far fewer options for residential development; however, the options have been limited because prices have gone through the roof. Unlike desirable parts of the Pittsburgh region, the North Hills still has an ample supply of land. What was needed was for the price of homes to catch up to the cost of development.
The Great Recession was a monkey wrench in the growth engine that was the North Hills. New financing regulations made development economically challenging. Consumers needed some time to deleverage and regain confidence in the housing market. Baby Boomers stayed in their homes longer than their predecessors. A decade later, the result was a housing market with little supply and booming demand again. Like in the 1990s, prices jumped.
“There is certainly a tremendous acceleration in the resale market,” says Tom Hosack, CEO of Berkshire Hathaway Home Services, The Preferred Realty and current president of West Penn Multi List Service (MLS). “I think the average sales price in the MLS area is up 17 percent from May 15. That’s unheard of in this market. Typically, houses are under agreement in two or three weeks on the market. We are down to about a month’s inventory of houses for sale. It’s the most insane real estate market I’ve ever seen.”
The pickup in demand that is overwhelming the tight supply is coming from young families seeking great schools to educate their children. Sound familiar? It’s beginning to look like the Millennial generation isn’t so different from its elders after all. After a decade of driving urban apartment growth, thirty-somethings are coming to the North Hills for the same reasons that the Baby Boomers did in the 1960s and 1970s.
“The young people coming from an apartment in the city will come north and their first step might be a townhouse. Once they start having families, they start looking at single-family homes. If they’re in a townhouse in the North Hills, they know the townships and the schools they want,” says Mihm. He believes that is the start of a lifetime love affair with the North Hills for a lot of families.
“As an example, North Allegheny schools have been superior for years. People that live in North Allegheny and want to move up will stay in the school district. That’s one of the reasons that Mallard Pond has been so successful,” Mihm continues.
Mallard Pond is one of the new communities at the higher end of the price range that are attracting move-up buyers in 2020. It has been an unusual year, by any standards, and a host of trends have emerged in the northern communities that are changing the housing market. Some of these can be directly attributable to the COVID-19 pandemic. Others are a result of demographics and economics. Whatever the reason, there are changes to the housing market in the North Hills that are likely to appear elsewhere soon.
The spike in prices that Hosack describes is the culmination of an upward trend that has been building for at least five years. The tight supply of existing homes for sale resulted in multiple offers and appreciation of more than five percent annually. Strong appreciation in home value is responsible for several trends in the market, including an overdue increase in new construction.
“The most notable change I see in the market is the small builder and developer has gotten a lot more active than in the last ten years. They are doing their own development and building houses and new plans,” observes Hoddy Hanna, CEO of Howard Hanna Real Estate Services. “I would say that’s the most prevalent change in the market. The North Hills has been dominated the last ten years by the corporate builders, but that has started to change.”
Builders like Ryan Homes, Dan Ryan Builders, and Maronda Homes took advantage of their strong corporate sales and balance sheets to gain market share throughout the region. In the North Hills, which had been built and developed historically by a roster of custom builders, the trend towards developing for high-volume builders was given a boost by the strict regulations on lenders that followed the financial crisis. The coincidental emerging empty-nester development trend allowed builders specializing in that product, like Weaver Homes and Traditions of America, to grab a bigger share of the market, leaving less land for the custom builder. By the end of the 2010s, it appeared that the custom builder had been squeezed out of the North Hills market. Reversing that trend means that a wider variety of homes will be available – something that is a North Hills strength – and that more move-up homes will be built.
“The market has been so strong. Couple that with the fact that the lending environment has become more realistic, so that development can be done in a way that can be profitable,” says Hanna. “In that period from 2008 to 2018 or 2019, banks wanted builders to get out of the development in two years. It’s not feasible for independent builders to get out of a project that quickly.”
“I wouldn’t say the resurgence of the multi-builder development is huge but, in the north, you have Mallard Pond and a handful of developments that seem to be selling very well,” agrees Hosack. “The perception is that Western Pennsylvania has always been a very conservative market and people were cautious about how much money they spend. It’s almost as if now they think they could die tomorrow so they are going to get a bigger house! And they’re paying higher prices than we have seen in this market.”
The reemergence of the custom builder is an addition to the market. Corporate builders and empty-nester developers have not reduced their activity. The new construction market has finally expanded, which gives buyers across the spectrum more options.
From the standpoint of new construction, communities in the North Hills remain among the most active in metropolitan Pittsburgh. In 2019, for example, the two most active municipalities in the region were Cranberry Township and Middlesex Township. Among the six most active places for new construction, four were in the North Hills. Through the first six months of 2020, Cranberry Township again leads the way with 376 total new units, with Middlesex Township and Pine Township following behind in third and fourth place.
“We’re seeing trends developing where urban buyers are going suburban, and suburban are going rural,” observes Hosack. “The move for a while was towards smaller homes and now people want larger homes. They don’t need one office; they need two since both adults are working from home.”
Data supports Hosack’s observation about new construction buyers migrating further north. While there are a few desirable communities that have seen steady demand from buyers, activity during the past three years has shifted to the north of the Route 228 corridor. New neighborhoods from higher-volume builders, like Ryan Homes, Maronda Homes, and Dan Ryan Builders, have opened up in Jackson Township and Forward Township. Those two communities, which lie along the Route 68 corridor, are in the northern portion of Seneca Valley School District. Permits for single-family homes in 2019 in Forward Township – 76 dwellings – were nearly triple the annual average of 29 for the 2010s. In Jackson Township, there were permits for 136 dwellings in 2019, more than double the average of 49 for the decade. And in Middlesex Township, which is in Mars Area School District, there were 169 permits for homes in 2019, compared to the average of 57 for the 2010s.
Conversely, once booming Ohio Township slowed as the 2010s wore on, with 21 homes permitted in 2019 after an average of 93 annually for the decade. Franklin Park issued permits for 97 new homes in 2017 but the total fell to 34 in 2019. Adams Township, which is the heart of Mars Area School District, saw construction slow from an average of 123 dwellings during the decade to 34 in 2019. In these communities, the supply of lots and available land declined, although it’s likely that Adams Township will see more land sold from farms to development as the 2020s unfold.
Builders will need that acreage if the current trends continue. Hosack points to another trend that is prevalent in the North Hills market. The shelter-at-home period of this past spring has had an influence on what buyers are looking to build. Even as prices have risen, homeowners have shifted their attention to the amount of time they are spending at their homes.
“One thing that has truly been significant is as we go through this COVID situation is that people want more space. We’re seeing so much demand for swimming pools that the contractors can’t keep up. Why? Because people are staying within their own living space,” says Mihm.
“We’re seeing people who are ready to invest more in their houses. That’s more of our current trend because of the virus. On our more recent sales, buyers are more interested in their house and doing more in their houses,” says Mark Heinauer, president of Barrington Homes. “They want to build a nicer, bigger house because they spent so much time in it recently. More of our buyers want swimming pools too, more than I can ever remember. A swimming pool in the backyard is a stay-at-home vacation.”
Barrington Homes is one of a half-dozen or so custom builders finding success in new neighborhoods at the high end of the market. Mallard Pond, which was developed by custom builder Heurich Homes, has five builders currently building homes that sell for more than one million dollars. Heinauer says that his firm is building seven homes in Mallard Pond, ranging from $1.3 million to $1.8 million.
“To sell that many homes at that price in such a short time is not a typical Pittsburgh deal,” Heinauer says. “I think part of that is pent up demand for Marshall Township, but we are seeing that at all of our neighborhoods.”
Those neighborhoods include Woodland Trace in Adams Township, where Barrington Homes has half of the 26 lots developed in Phase 1 and 2 under construction. Barrington is also active in Lake MacLeod and The Ridge at North Park Manor in Pine Township. Pine is also home to several other million-dollar custom communities, including Pinewood Manor, Spirit of Pine, Villas of English Farms, and Sunset Ridge.
Heinauer looks to build on that success with a new development in Middlesex Township. The rounds of municipal and state approvals have been completed, with permits pending. The project, yet to be branded, will develop 87 acres of farm and forest to create 62 new building lots. Heinauer explains that the project will be split by a main landscaped boulevard, with 51 lots on one side of the main road and 11 estate homes on the other.
“Heartland Custom Homes will build the 51 lots and the 11 estate homes will be for Barrington Homes,” he says. “We expect to get started with earthwork in the late fall.”
The success of the many high-end custom communities is not a surprise. The North Hills has a high share of high-income earners. Mihm points out that those demographics are why Bobby Rahal Motors located the region’s only Maserati and Bentley dealerships on Perry Highway in Wexford, right next to its Lexus and Mercedes Benz stores. Those high incomes translate to demand for homes with bigger price tags. That tends to favor new construction, even though the higher end of the resale market is doing well, according to Mihm.
“I guess the question is, what is higher end?” laughs Hanna. “We’ve seen a flurry of houses sold in the North Hills over a million dollars. There have been some resales but that’s been mostly new construction. That new construction product over a million dollars just seems to go bang-bang. I think we’ve sold 15 new construction houses over a million dollars but that goes back to the buyer who doesn’t want to buy a 20-year-old house of the same size, unless it has been fixed up. If a buyer is spending a million dollars, they want the house almost like new.”
Time will tell what influence that preference has on the resale of upscale homes that were built in the 1990s and 2000s prior to the Great Recession. Those neighborhoods attracted many of the people who moved to Pittsburgh for jobs during those decades. Relocation buyers have always made up a disproportionate share of the North Hills home sales, especially for new construction. Demographics could come into play in those 20-year-old neighborhoods if a large number of the empty nester residents try to sell at the same time. A glut in the market is not the concern of anyone in today’s real estate market, however. Hanna, among others, is more concerned about the shortage of homes at the other end of the price spectrum, and sees another potential trend forming.
“There is no new construction under $300,000,” Hanna says. “We are seeing home flippers going into older neighborhoods, buying homes for $150,000, renovating kitchens and floor plans, and bringing them back on to the market at $300,000. People are buying that product. These are in school districts that may not be the best known, but that provide a great education. They are houses that are affordable and newly renovated. It gives the buyer the house that they want.”
This sort of up-cycling of older homes would bring new buyers to older communities like Ross Township or Shaler Township. There is an abundant inventory of houses in the range of $150,000 to $180,000 that just need a new kitchen, updated bathroom, or an open floor plan to come back on the market as the kind of house that young buyers want. Land prices and land development rules have made it unprofitable to build new neighborhoods that are accessible to the young families that have always blanketed the North Hills. With the wave of senior living communities finally drawing Baby Boomers out of their family homes, it’s very timely to have new construction of all sorts in the market.
What’s hot in the northern communities is a new twist on what was hot a generation ago. High-end new construction put the North Hills on the map. Today’s version of that product is driving a renaissance of sorts for the kinds of custom-built communities that broadened the spectrum of housing options in the north, but at prices that are out of reach for most young families. Creative builders are responding to that gap in the market by taking the homes that were the move-up houses of an earlier generation and making them accessible to another generation of families on the move. The northern communities have the housing that is meeting today’s family where it wants to live, with the lifestyle amenities that have always made the North Hills the place to be. NH