Continuing Economic Recovery and Balanced Housing Market Conditions in the Pittsburgh HMA

Continuing Economic Recovery and Balanced Housing Market Conditions in the Pittsburgh HMA

Mildred Jara is a regional economist in the Philadelphia Regional Office for HUD's Economic and Market Analysis Division

HUD's Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.

The Pittsburgh Housing Market Area (Pittsburgh HMA) in southwestern Pennsylvania is coterminous with the Pittsburgh, PA Metropolitan Statistical Area and includes Allegheny, Armstrong, Beaver, Butler, Fayette, Washington, and Westmoreland Counties. The city of Pittsburgh in Allegheny County is Pennsylvania's second-largest city with a population of 303,255 as of July 1, 2023 (U.S. Census Bureau population estimates). The HMA's population, estimated at 2.33 million as of May 1, 2024, has been declining since 2014; however, the pace of population loss has accelerated since 2021. The population has declined by 11,150, or 0.5 percent, annually since 2021, with net natural decline (resident deaths exceed resident births) accounting for 70 percent of the decrease and net out-migration accounting for the remaining 30 percent. By comparison, from 2014 to 2021 the HMA's population declined by an average of 0.1 percent annually entirely due to net natural decline. An increasing share of retirement-aged residents in the HMA since 2010 has accelerated population loss because of higher levels of net natural decline and net out-migration of retirees moving to southern states. A recent Comprehensive Housing Market Analysis highlighted the Pittsburgh HMA and reflects local conditions as of May 1, 2024.

The economy of the Pittsburgh HMA historically has depended on the manufacturing sector, particularly steel production. During the first half of the 20th century, the HMA produced more than one-half of the nation's steel. From 1960 to 1990, however, manufacturing payrolls in the HMA declined significantly, and the HMA's economic base has since transitioned to services. The education and health services sector, the largest sector in the Pittsburgh HMA, accounts for 22 percent of total nonfarm payroll jobs. This sector includes the HMA's two largest employers: the University of Pittsburgh Medical Center (UPMC) and Highmark Health, with a combined 83,100 jobs.

The Pittsburgh HMA economy continues to recover from the COVID-19 pandemic, whereas the national economy recovered in 2022.

Nonfarm payrolls in the HMA increased year-over-year during the past 12 months, but the pace of job growth slowed from a year earlier. During the 12 months ending in April 2024, nonfarm payrolls rose by 13,700 jobs, or 1.2 percent, to 1.16 million, down from the 2.2 percent growth rate during the 12 months ending in April 2023. Despite continued job growth, the HMA's economy is still recovering from significant job losses in March and April 2020 from countermeasures taken to slow the spread of COVID-19. As of April 2024, approximately 99 percent of the 207,800 jobs lost in March and April 2020 were recovered (monthly data, not seasonally adjusted). By comparison, nonfarm payrolls in the nation increased at a rate of 2 percent during the 12 months ending in April 2024 and are 4 percent above the average level of jobs in 2019, the year before the pandemic. 

During the 12 months ending in April 2024, job growth in the Pittsburgh HMA occurred in 8 of the 11 payroll sectors, led by the education and health services sector, which accounted for approximately 60 percent of total job gains. The education and health services sector increased by 8,200 jobs, or 3.4 percent, during the 12 months ending in April 2024, accelerating from a growth rate of 1.8 percent a year earlier.

During the next 3 years, nonfarm payrolls are expected to increase by an average of 0.5 percent annually to 1.18 million jobs. Ongoing hospital expansions, including the construction of the $1.5 billion UPMC Presbyterian hospital in Pittsburgh's Oakland neighborhood, are expected to support job growth in the education and health services sector.

Rising mortgage rates contributed to declining home sales, and increases in new apartment deliveries contributed to rising apartment vacancy rates. 

The home sales market in the HMA is balanced, with an estimated vacancy rate of 1.4 percent as of May 1, 2024, down slightly from 1.5 percent in April 2020. The sales market has eased from tight conditions in late 2020 and 2021 largely because rising mortgage interest rates since 2022 have suppressed home sales. However, rising rates have contributed to a low inventory of homes for sale because homeowners with current mortgages at lower interest rates have been deterred from selling their homes. The interest rate for a 30-year, fixed-rate mortgage averaged 7.0 percent in April 2024, up from 6.3 percent in April 2023 (Freddie Mac). In April 2024, the inventory of homes available for sale in the Pittsburgh HMA represented 2.2 months of supply compared with 2.6 months in April 2023 (CoreLogic, Inc.). The limited inventory of homes for sale has supported price growth despite declining home sales. During the 12 months ending in April 2024, home sales fell 11 percent year over year to 33,250 homes sold, and the average price of a home sold increased 3 percent year over year to $267,900. Despite a modest increase in single-family home permitting during the past year, permitting is below 2020 and 2021 levels, when historically low mortgage interest rates led to heightened demand for homes. During the 12 months ending in April 2024, 3,425 homes were permitted, up 4 percent from the previous 12 months. During the next 3 years, demand is estimated for 10,450 new homes. 

Rental market conditions in the HMA are balanced, easing from tight conditions in 2022. As of May 1, 2024, the overall rental vacancy rate is estimated at 8.6 percent, up slightly from 8.5 percent in April 2020. An elevated number of apartment completions combined with lower levels of absorption during the past 2 years have contributed to the easing of market conditions. The apartment vacancy rate was 6.5 percent as of the first quarter of 2024, up from 6.0 percent as of the first quarter of 2023, and the average apartment rent rose 2 percent year over year to $1,313 compared with a 4 percent increase as of the first quarter of 2023 (CoStar Group). In response to the surge in new rental supply entering the market and easing apartment market conditions, rental permitting has declined compared with a year ago. Rental permitting fell 19 percent to 3,225 units during the 12 months ending in April 2024. During the next 3 years, demand is estimated for 8,975 new rental units.