Date: March 2008
Article: "Everything You Know About Philly Real Estate Is Wrong"
Author: Christine Speer
So, we're having the kind of housing swoon we haven't seen in decades? Uh, not exactly. From the city to the suburbs to the Shore, here's why the Philly market is better than you're being told — and what it means for you
THE STATE OF REAL ESTATE. You hear a lot about it these days — most of it bad. Sub-prime disasters. Spiraling prices. Stagnant sales. But take heart, Philly. Because there's one thing you may not have heard, yet: that real estate, like politics, is local. And our industry insiders actually have good news for you about buying, selling, owning, borrowing, wheeling and dealing, in Philadelphia … and beyond. On the following pages, we address the most common perceptions out there about the region's housing market, and present you with the truth about real estate, right here, right now — including the inside scoop on best-bet neighborhoods, a detailed look at local home prices, and (free!) real estate advice from the pros.
Plus: What your million bucks buys these days, how to sell your place faster than your neighbors sell theirs, and why you should ignore everything Katie Couric says about the housing market.
The real estate market is just crappy right now — everywhere.
The Philly reality: It's Bernanke-affirmed: The downturn in the American housing market has been huge. Home prices have dropped, sales of new homes have fallen, and there are more homes for sale than there are buyers — all classic indicators of a down market. And even, some economists think, of a recession.
But you, Philly, get a pass — at least in part. Metropolitan Philadelphia, historically a stable market, continues to fare far better than the rest of the country.
"Over the holidays, I traveled to Arizona and California," says Allan Domb, president of Allan Domb Real Estate and king of the Center City condo scene. "In those local newspapers, I saw ads from realtors who showed 12 listings, eight of which were bank repos, foreclosures. And we're not talking inexpensive prices; one was $977,000, in a beautiful area. You don't open the paper here and see 66 percent of houses for sale as foreclosures. You just don't." Of course, realtors have a vested interest in painting a pretty market picture. But that doesn't mean Domb's insight isn't on target.
Here's why: First to feel the pinch in a down market tend to be the secondary and tertiary housing markets — a.k.a. vacation homes. (When interest rates shoot up, these are the first on the chopping block.) Greater Philly is a region of primary residences, with owners who live where they work and contribute to the local economy. That economy is based on industries that go beyond new construction and tourism (and into manufacturing, government, health, education, financial services). These are key factors in a stable market. So while "we're definitely going to come away from this cycle bruised," economist Ryan Sweet, of Moody's Economy.com, notes, "we're not going to have the black eye other markets have."
Even the 'burbs continue to do relatively well. Though Robert Toll, the Horsham builder of national McMansion fame, has fared better than many other big-time builders, his company has suffered record losses since the slide took hold two years ago. But he remains optimistic about the Philadelphia area.
"Philly suburbs are an anomaly," Toll says. "Chester and Bucks counties are exceeding our expectations. It's because there's a diverse employment base, constrained supply, and some of the best school systems in the country. They are good places to live, so people — and businesses — continue to move there. When places grow, you've got buyers."
There has also been a difference in market activity over the past several years between Philly and harder-hit areas. Many investors in lucrative markets raked in the cash from buying and building low, for cheap loans, and reselling at high prices. And then the bubble burst, rates went up, prices dropped, and investors fell hard. Almost none of this characterized the market in good old Negadelphia, though, where a time-honored skepticism among buyers and investors and very little new building worked in our favor. Put plainly: We didn't fly quite as high, so we didn't have as far to fall.
I think Philly — particularly the Main Line — is essentially a recession-proof, economically immune, bulletproof area," says Lavinia Smerconish, a Prudential Fox and Roach agent and longtime real estate player on the Main Line. "But we aren't media-proof. The sub-prime lending fallout? Eh. Not so much here. But we all read about it. So the buyers stay home — and it becomes a self-fulfilled prophecy." (For more on the Realtor vs. the Reporter, see Smerconish's essay on page 101.)