Economic Choices 2008 - Housing and Pennsylvania
Friday, April 18, 2008PAUL KANGAS: In Washington, the rule is all politics is local. In real estate, the rule is location, location, location. Which got us wondering: what's the political reaction to a nationwide housing bailout in a location where the housing market never boomed? As Darren Gersh reports, that's an economic choice facing voters in Pittsburgh as they head to the polls Tuesday for Pennsylvania's presidential primary.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Compared to the wreckage that is the housing market in much of the country, the Pittsburgh area looks pretty good. For many, many years, housing here has been slow, but steady. This market was just never exciting enough to interest sub- prime lenders. And builder Dion McMullen says the Pittsburgh area operates in a conservative business climate.
DION MCMULLEN, PRESIDENT, LONDONBURY HOMES: We don't have a whole lot of 100 percent financing around here. We don't have a whole lot of inflation to our real estate, so therefore we don't have a lot of deflation when the economy is down.
GERSH: Out of the nation's 100 largest cities, Pittsburgh ranks 86th in the number of foreclosures. There was never a housing boom here, so there's never been a housing bust. All of which makes the idea of bailing out homeowners in other parts of the country a tough sell. When contractor Ed O'Donnell hears about election year plans to prop up housing, he thinks of better ways of spending his money.
ED O'DONNELL, PARTNER, O'DONNELL/DEAN EXTERIORS: I'd like to see our taxes going for something a little bit more forward, you know, maybe health care or something like that.
GERSH: There may be homeowners who deserve help, but first O'Donnell says he would like to see lenders step up to their responsibility.
O'DONNELL: Extend their loan maybe. I'm not against that. But as far as more handouts, I mean how many different ways can we keep handing money out?
GERSH: It's hard to find anyone here who was making money flipping homes. And the people we talked to in Pittsburgh just have a hard time understanding why the country as a whole needs to help the states where foreclosures hit hardest.
DION: Is this a national problem? Or is this a five to eight-state problem where the booms and the heavy inflation took place?
GERSH: It's a good question, which McMullen answers this way. He thinks stress in other markets has led some appraisers here to tighten up on valuations, which means some kind of bailout probably makes sense.
DION: It's upsetting in a way, but I can understand how nationally we do have to treat this because anything that affects the national economy will affect everybody locally at a certain level.
GERSH: Christopher Briem studies the Pittsburgh regional economy. He says the area is now less insulated, its fate increasingly tied to national trends which is why what happens to homes in San Bernadino and Miami matters here.
CHRISTOPHER BRIEM, REGIONAL ECONOMIST, UNIVERSITY OF PITTSBURGH: I believe people have heard the cry for help and are willing to support something. I don't think we've seen the cost side of it yet. Right now you are arguing over how much benefit to provide. We don't see costs until later on.
GERSH: Along with a better idea of the costs, McMullen would like something else, a real examination of the factors that led some lenders to pump up the housing bubble.
DION: Somebody's got to explain the reasoning behind why that happened and something's got to be done so it doesn't happen again in the next good market.
GERSH: That's a major concern for voters in a stable market like Pittsburgh, which isn't expecting to take part in the next housing bubble or bust. Darren Gersh, NIGHTLY BUSINESS REPORT, Pittsburgh.
