Lancaster, PA is one of the booming-est hotspots for real estate in Pennsylvania.
Why?
The county and city have earned a lot of compliments over the years.
#1 place to retire. “Cheaper Brooklyn.” Home to the “coolest small town in America,” which is somehow Lititz.
All of this positive press has driven a lot of positive sentiment about Lancaster.
It’s also driven a positive surge in real estate.
I learned this the hard way. So learn from my mistakes.
Here’s what I wish I would’ve known before buying a house in Lancaster, PA.
#1. The Middle Class Is Dead
Or at least the real estate market treats the middle class like it’s dead.
Public housing prices are insane right now.
The houses that used to cost $100,000 a decade ago can now easily cost $250,000, especially when you’re looking in western Lancaster City.
What gives?
While yesteryear’s home buyers are elated at their 100%+ property value increase, it carries all the familiar symptoms of an economic bubble.
Namely, housing prices are divided into two markets: Rich and poor.
$100,000 has never gone shorter than today in terms of property. It’s just enough to get you a broken rowhome in a half-decent neighborhood with worse schools.
Conversely, McMansions have never been more profitable with price tags just starting at a clean $350,000.
That means unless you make six figures — which places you in the top percentile of earners in Lancaster — you have almost no housing opportunities.
You have beginner homes or no home. There is no middle ground.
In its rush to become hip, popular, and wealthy, the Lancaster economy has ripped out its own backbone — the middle class.
But here’s the thing — lower-earning individuals (less than $100,000 annually) are in an even worse spot.
To buy a house, they have to compete with the local bigwigs.
#2. Beginner Homes Are Also Investment Homes
A funny thing happens when the middle class disappears in a local economy — the rich and poor start fighting over housing.
The poor want houses so they can live. The rich want houses so they can rent to the poor.
And because the rich have more economic options when it comes to buying property, they’re more likely to beat the poor in every bidding war.
So instead of incubating a new generation of landowning individuals, the economy shifts to renting.
After all, what better way is there to make money than to own a rental home in “the new Brooklyn?”
As it turns out, there is a better way.
When you develop the housing and sell it yourself, you open the door for three of the most dreaded letters in a buyer’s real estate market.
HOA.
#3. HOAs Are Scams
So when you buy a house, you get homeowner’s insurance. You bet a company that something will go wrong with your house, and the company bets it won’t.
Then, you pay them an insane amount of money so you can keep gambling.
And weirdly, you hope both of you are right.
But what if you could do that twice, and the second organization did even less to help you?
That’s a homeowner’s association.
HOAs got their start by bragging about how they take care of your lawn and snow removal.
Some of them might even replace your roof if you need to, which can cost about $15,000.
But when you add up the numbers, it’s insane how much HOAs cost in the long run.
So say you buy a house for $150,000 and there’s an HOA of $200 per month. That’s a lot of cash.
Over the course of your 30-year mortgage, you’ll play an additional $84,000 to your HOA for lawn service and snow removal.
Wouldn’t you rather have $84,000 than spending it on a secondary insurance company?
This is even more apparent when you consider that HOAs can tell you what to do with your property.
If you’re going to buy a house, why would you buy something that essentially comes with a nosy landlord?
#4. Rural-Specific Loans Exist
Did you know that most of Lancaster qualifies for a special mortgage called a USDA loan?
It’s true — and it applies to basically anywhere in Lancaster County, thanks to all of the farmland around here.
The USDA loan — named for the US Department of Agriculture — guarantees single family housing for successful applicants who meet certain criteria.
Income, occupancy agreements, and other terms apply. But you can basically buy a house without any downpayment.
(Within reason, anyway.)
So if you’re shopping outside of Lancaster City — even just outside Lancaster City — you can probably qualify for a USDA loan to get a really unusual, really sweet deal on a house.
If you don’t mind the high monthlies, anyway.
By the way, those high monthly payments can’t last forever. In fact, housing market trends rarely last longer than a few years.
Lancaster County has had a booming real estate market for more than half a decade now.
That means it’s almost time to change.
#5. It’s (Almost) a Buyer’s Market
A buyer’s market means that available real estate is in rich supply and there are very few buyers to accommodate it.
This is when purchasers have all of the power, using the threat of saying “no” as an opportunity to save thousands on buying a home.
This goes triple for the wealthy individuals we discussed earlier. They can pick and choose and buy in massive quantities that were otherwise unavailable in a seller’s market.
So if you want to buy at a lower price (but a slightly higher interest rate), the buyer’s market is the time to do it.
And considering the Lancaster housing market has been bullish for quite some time, you can expect it to start taking a downturn — which is actually good for prospective buyers — in the next year or two.
So if you’re eager to buy, it might actually be better to wait.
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