Mortgage rates are going up, fast. This year, Pittsburgh’s housing market has hit a major slowdown, with a steep drop in home sales. Sales have plunged by 12.7% compared to the same time last year, one of the largest declines among U.S. cities. According to the ReMax National Housing Report, Pittsburgh was among the top five major cities with the biggest drop in closed home sales. Real estate experts note that the “big-time” slowdown reflects a major shift in the market, cooling from the red-hot pace of previous years. Dustin Nulf, owner of Nulf Real Estate, remarked on how much the market has cooled, pointing out that the excitement and speed of the past few years have calmed down noticeably.
Inventory Piles Up as Buyer Demand Falls
As buyer demand has decreased, the number of available homes for sale has increased significantly in Pittsburgh. In both Allegheny County and the city itself, housing inventory has risen by about 50% this year, according to West Penn Multi-List data. More homes on the market usually mean that prices could start to come down, as sellers might need to compete more to attract buyers. Experts explain that rising inventory is a common indicator that a housing market is slowing down, as buyers become less eager to purchase and sellers hold onto their listings longer. Brian Teyssier, a ReMax agent in Lawrenceville, said that the market is now “coming back down to normal,” after what he described as an “unrealistic peak.”
Higher Mortgage Rates Make Homes Less Affordable
A few years ago, low mortgage rates made homeownership more affordable, leading to high demand and record prices. However, the situation has changed with mortgage rates rising steadily since early 2022. Today, mortgage rates hover around 6.66%, significantly higher than they were during the pandemic. Although the Federal Reserve cut interest rates by half a percentage point in September, mortgage rates remain high, making it challenging for many buyers to afford a home. This disconnect between interest rate cuts and mortgage rates is due to fixed mortgage rates being influenced by the 10-year treasury bond yield, which has been on the rise as investors anticipate the Fed will be cautious with further rate cuts.
The result? Fewer people are able or willing to buy homes, and high prices continue to discourage potential buyers. Many who might have jumped at the chance to buy a home during the pandemic are now hesitant due to the increased monthly costs of mortgages.
From a “COVID Unicorn Market” to Reality
During the COVID-19 pandemic, the housing market across the U.S., including Pittsburgh, saw what experts call a “unicorn market.” With low interest rates and a unique environment, many people were eager to buy homes quickly, often making multiple offers above the asking price. Houses sold almost immediately, with buyers forgoing typical contingencies like home inspections. Pittsburgh’s real estate market was no exception, with homes selling at an unusually fast pace and often with multiple bids.
However, this “unicorn” market didn’t last. The Federal Reserve’s decision to raise interest rates starting in early 2022 to address inflation marked the end of these boom days. Mortgage rates rose dramatically, hitting 7.57% in October 2023. This shift has brought Pittsburgh’s market closer to “normal,” where houses may still attract interest, but not with the frenzy of previous years. As Teyssier noted, a home may now get one offer one day and perhaps another the next, a far cry from the 15 offers in a single day seen during the peak.
Affordable Housing Challenge Grows in Pittsburgh
Pittsburgh has historically been seen as an affordable housing market, especially compared to other major U.S. cities. However, recent years have seen significant increases in both home prices and mortgage rates, making homeownership harder to attain for many. For example, a house that might have sold for $275,000 in 2021 with a low interest rate of around 3.5% would have resulted in a manageable monthly payment of about $988 with 20% down.
Now, that same house could cost around $350,000, and with today’s interest rates around 6%, the monthly payment is closer to $1,679—a nearly 70% increase from a few years ago. This jump has created a serious affordability problem, pricing out many buyers who could previously afford a similar home. According to Nulf, these changes mean that “properties are far less affordable now,” making Pittsburgh’s market harder for first-time buyers and those with limited budgets.
Economic Uncertainty and Election Concerns
Several factors beyond interest rates and home prices may also be influencing Pittsburgh’s housing market slowdown. The city has faced some economic challenges, including a declining population and the loss of major employers after COVID-19. For example, Pittsburgh lost several significant business units, including Uber’s and Ford’s self-driving car research teams. This decline has had an impact on local demand for housing, as fewer new residents move to the city and fewer employees in high-paying industries settle in the area.
Adding to the uncertainty, some real estate experts believe the upcoming presidential election could be causing some hesitation among potential buyers. Mike Netzel, a team leader at Keller Williams Real Estate, suggested that political uncertainty might be another factor in the market’s slowdown. Buyers may be cautious, waiting to see what happens with policy changes that could affect economic stability and mortgage rates.
Overall, Pittsburgh’s real estate market has shifted from the fast-paced, high-demand market of recent years to a slower, more uncertain one. With higher interest rates, rising inventory, and broader economic factors at play, Pittsburgh’s housing market reflects a broader trend of markets cooling down across the U.S. As the market adjusts to these new conditions, prospective buyers and sellers alike are navigating this changing landscape with more caution than in recent years.
