On the House | Phila. market: Not the time or place for panic

Posted: May 20, 2007

When you've covered as many real estate upturns and downturns as I have, it isn't all that difficult to figure out changes in the market.

Buyers, sellers, builders, and real estate professionals behave a certain way in a down market and a certain way in an up market.

For example, if the supply of houses for sale is tight, the typical buyer will walk five feet past the front door, hand the agent a check for the deposit, flash preapproval documentation for the mortgage, and read quickly through all the disclosure forms.

Faster than the buyer can pull a pen from a pocket, he or she will sign the agreement of sale - waiving a home inspection and removing all other contingencies - and leave with the words, "I'll see you in 90 days, unless the seller wants to do it in 30."

If supply is abundant, the typical buyer will bring an electron microscope to inspect for dust mites and leave the checkbook in his desk drawer.

Not only will there be a home inspection, but there will be lead and radon tests, and every termite that has ever had occasion to pass within a half-mile of the house in question will be extensively interviewed.

When the listing agent calls the next day, the buyer will say, "Yes, I guess it was a nice house, but we still have 200 more on our list to look at."

As the experts both inside and outside the Philadelphia region keep repeating, sales volume here may be down, but median prices continue to rise - although not as much as they did during the recent real-estate boom.

In this market, we tend to be conservative in our choice of financing options, and our economy is diverse and growing. Our foreclosure rate is lower than in other major markets because home prices here simply played catch-up after years of being depressed.

Because this region is perpetually overlooked, we weren't swamped by investors artificially boosting prices and then abandoned by them, artificially pushing prices down.

We remain a bargain compared with New York, northern New Jersey, and Washington, where soaring prices put housing out of the reach of vast numbers of potential buyers, and listings are going begging.

If you're standing in the middle of this looking inward, or if you thought you were going to make a zillion dollars selling the house you bought two years ago, you are going to be disappointed.

Because our market is the way it is, the number of people who have decided to hold lotteries to unload their houses is few this time.

There also appear to be few "short sales," which is what happens when the outstanding loans against a property are greater than what the property can be sold for. Experts recommend holding on to the house - until the market improves - and renting it instead of selling it short.

In the mid-1990s, when the city's median sale price was about $59,000, a lot of Philadelphia homeowners who could afford it held on and rented properties they couldn't sell - and, by extension, built equity for future expenses, such as sending the kids to college.

Although those people had to wait a few years to see whether what they had done was smart, the fact that the median city price has risen to about $130,000 suggests that the uncertainty was probably worth it.

The bottom line: Don't panic now. All real estate is local, sometimes right down to the street but certainly down to the municipality. And even housing economists acknowledge that national numbers mean very little, except when you're using them to assess how one region measures up to all the others.

Looking at the surplus on the market today, should you be hesitating to list your house for sale? The answer is no. Should you keep the asking price to what your real estate agent, and most importantly, the market, is dictating? The answer is yes.

Don't expect your house to sell overnight. We are back to the 50-or-so-days-on-the-market median that was normal before our rather restrained version of the boom.

Looking at data from Trend Multiple Listing Service, I see that houses that sold in the first three months of 2007 sold for anywhere from 92 percent to 98 percent of asking price - about the same as last year. It's just taking a little longer to sell them.

So be patient, if you can.


"On the House" appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

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