Housing slide is milder here than in most areas

Posted: May 06, 2007

The numbers say it all: Philadelphia and the seven counties surrounding it are weathering the slower residential real estate market better than much of the rest of the country.

In the first quarter of 2007, pending existing-home sales for this region were down just 5.3 percent, or 685 houses, compared with the same period in 2006, according to data compiled by Trend, the multiple-listing service (MLS). It took about two weeks longer to sell a house this year than it did last year, but median prices continued to increase, the Trend data showed.

That repeats the pattern begun in 2006, which also was a bit of a mixed bag for existing-home sales, according to Prudential Fox & Roach's HomExpert market report, based on MLS data. Last year, median prices rose in all eight counties, while sales declines were mainly in the single digits.

In 2006, Center City experienced a 24.3 percent increase in sales over 2005's levels, according to HomExpert, but a 3 percent drop in median price.

Over the long haul, however, that seems to mean very little. Data compiled for the Center City District by economist Kevin C. Gillen of the Wharton School showed that average sale prices for condos and houses have increased 8 percent a year since 1986, with appreciation rates ranging from 201.7 percent to 684.8 percent, depending on the neighborhood.

Though the numbers were tracked over two decades, much of Center City's housing-price appreciation has occurred in the last 10 years.

In the "condo world, prices rose 15 percent from 1980 to 1996, or 1 percent a year," said Allan Domb, president of Allan Domb Real Estate, who has developed several high-end condo buildings downtown. "From 1996 to 2005, there was a 300 percent increase."

Yet while sales were slower in the first quarter of 2007 than in the first three months of 2006, Trulia Inc., a California firm that tracks real estate trends, ranked the Philadelphia market third (after Manhattan and Chicago) in the number of properties for sale viewed on its Web site.

What are these surfers looking for? A 1,911-square-foot single-family with "3.2 beds, 2.1 baths," and a $262,900 median list price, said Trulia's Alissa Weinstein.

Larry Flick, Prudential Fox & Roach's chairman and CEO, called Southeastern Pennsylvania's 3.8 percent median-price increase in 2006 "more typical" than the double-digit rises of the previous two or three years.

The National Association of Realtors, which relies on figures from multiple-listing services, will not have its first-quarter data until May 15, but an 11.3 percent drop in sales nationwide for March compared with March 2006 led chief economist David Lereah to suggest that the fallout over problems with subprime lending may continue to dampen the housing market.

Long-term mortgage rates are about half a percentage point lower than they were in the first quarter of 2006, but short-term rates remain higher than in the boom years of 2003 and 2004, when many buyers turned to adjustable "exotic" loans to cope with rising home prices - and are now facing higher payments.

That said, this region also appears to be riding out the storm over subprime lending better than most. For the first quarter of 2007, Philadelphia was ranked 67th of the 100 largest metropolitan statistical areas in foreclosure activity, with one for every 366 households, according to the RealtyTrac Foreclosure Market Report.

The No. 1 market, Detroit, registered one foreclosure for every 51 households, with No. 2 Las Vegas at one for every 57 households, RealtyTrac reported. Pennsylvania's foreclosure rate dropped almost 30 percent from the first quarter of 2006, while New Jersey's rate rose about 50 percent - most of it in the northern, higher-priced part of the state.

One reason why this region's foreclosure rate may be lower than others is the fiscal conservatism of the typical borrower here, said Brett Warren, president of Buyers Home Mortgage in Abington.

"People here still tend to go for fixed-rate rather than adjustables," said Warren, who puts the ratio for his brokerage business at nine out of 10. "I've done very few ARMs in the last two years."

In addition, median prices here remain well below those in troubled parts of the country such as Washington, D.C., Southern California, Florida, Las Vegas, Boston and Phoenix, "which means that buyers here didn't have to reach to afford the sale price in the majority of cases," Warren said.

In fact, when housing economists and consumer groups lobbied successfully with federal regulatory agencies to limit the writing of so-called "exotic" mortgages, they mentioned California, Florida and the Southwest as areas in danger of having too many.

Still, there is growing evidence that poorer neighborhoods in Philadelphia, Camden, Chester and the older suburbs have been victimized by predatory lenders.

In Lost Values: A Study of Predatory Lending in Philadelphia, published by the Reinvestment Fund, author Ira J. Goldstein analyzed 15,500 properties citywide and concluded that "conservatively," 3.1 percent of owner-occupied homes in the city "manifest a financing pattern suggestive of the fact that they were touched by predatory lending."

That percentage increases when accessing home equity is put into play, and the number of times that was done increases the foreclosure rate far above the numbers RealtyTrac's survey shows for the population as a whole.

The problems of predatory lending cannot be minimized, but this region's real estate market remains in better shape than others.

Warren's reasoning on this point is seconded and further explained by economist Lawrence Yu, of the Realtors' association.

"Markets that had extreme run-ups in prices are seeing soft sales figures and flat or no growth in prices," Yu said. Philadelphia's home price increases were moderate by comparison, especially "because the region is between New York's New Jersey suburbs and Washington," where the run-ups were frenzied.

"With more moderate increases, you would only expect a modest slump," Yu said. In addition, Philadelphia's market didn't have the hordes of investors "who artificially drove up prices in other markets, then pulled out, creating an oversupply of artificially depressed prices."

Even after a few years of double-digit increases in median sale prices, housing here remains a relative bargain, although how eager buyers are to pay even reasonable prices depends on where they are coming from.

"People from the South and Midwest, for example, are having to cope with declining values of the homes they are trying to sell," said Terry Kirkwood, relocation director for Duffy Real Estate on the Main Line. "The one thing that has changed is that buyers are more cautious and take longer to decide."

Center City, characterized by Penn professor Eugenie Birch as one of just five "fully developed downtowns" in the United States, grew in population by 28 percent between 1960 and 2000 while the city as a whole lost 24 percent of its residents.

Even if you don't have time to count the people, it is easy to see how much the central business district has changed physically over the last two decades, with One and Two Liberty Place, the Kimmel Center, new residential construction and condo conversions, cafes, specialty food stores, and shops.

Or, as the 2007 Center City District report headlines it: "Steady appreciation, sustainable growth."


Year-to-date Existing Home Sales

These figures for the eight counties in the Philadelphia region reflect activity in the first three months of each year reported to Trend multiple listing service. They do not represent every sale of an existing home.

    2007     2006    

   Units   Median   Days   Units   Median   Days   

   sold   sale   on   sold   sale   on   

      price*   market      price*   market   

Bucks County   1,394   $283.2   53   1,394   $285.0   38   

Burlington County   1,215   $235.0   69   1,343   $235.5   43   

Camden County   1,411   $189.9   59   1,497   $183.9   41   

Chester County   1,240   $299.5   59   1,276   $294.0   41   

Delaware County   1,410   $195.0   44   1,473   $180.0   32   

Gloucester County    723   $220.0   66    739   $208.0   47   

Montgomery County   1,923   $270.5   50   2,121   $263.0   34   

Philadelphia   3,608   $130.0   47   3,766   $125.0   38   

   12,924         13,609   

* Price in thousands of dollars Source: Trend MLS, April 12, 2007


Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

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