In Pittsburgh, downturn shifts market trend from buying to renting

Pittsburgh Business Times - May 8, 2009
By Ben Semmes

In late 2007, Maronda Homes Inc. began building a new 300-townhome neighborhood on about 25 acres along McKees Rocks Road in the western suburb of Kennedy Township.

But as the housing market slowed, Maronda changed course.

“Initially, these were going to be built to be sold,” said David Hufnagel, a local building code official.

Maronda is now building the townhomes and selling the lots, more than $3 million worth so far, as rental housing to an affiliate of A.R. Building Co.

A representative with Maronda did not return calls requesting comment.

Hufnagel, who conducts building inspections in seven municipalities in the western suburbs including Kennedy, said the Maronda development, known as Kennedy Highlands, is the largest project underway throughout his coverage area.

“I don’t have a whole lot of (for-sale) residential going on right now,” he said.

A nationwide housing downturn and credit crunch have pushed many prospective buyers back into the renter column. Local developers are lining up to fill the demand, converting for-sale units to apartments or opening up part of their developments to the rental market.

“We do have some for-sale stuff, but we are getting rid of it,” said John Thompson, president with A.R. Building, which plans to acquire about a third of the Kennedy Highlands lots from Maronda to lease as rental housing.

A.R. Building transitioned from building single-family homes to exclusively multifamily units in the late 1990s and then to only rentals a few years ago, Thompson said.

Thompson, who runs a separate single-family home construction business called Brooks and Blair Homes LLC, said the rental market has remained fairly strong in the downturn.

“We seem to be having better luck with the rentals,” Thompson said. “We are still selling the for-sale stuff, but slowly.”

Ralph Falbo, president of Downtown-based Ralph A. Falbo Inc., has long been a developer of apartments, but ventured into market-rate condominiums only in the last few years.

“I think that, generally speaking, the rental market is much stronger than the condo market, although rentals have to be affordable to people,” said Falbo, whose company is working to sell units at 151 First Side Downtown and Crescent Court at Summerset at Frick Park in Squirrel Hill.

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