Philadelphia housing market fares better than many

The U.S. housing market still looks bleak. In July, prices dropped for the third straight month, and sales of new houses dipped yet again. Last week, mortgage applications fell off after Wall Street's wild ride, though interest rates remained very low.

But in the Philadelphia region, local observers say, things aren't looking so bad, which has been the case through much of the real estate bust.

New-home sales here are sluggish just like everywhere else, said economist Kevin Gillen of Econsult Corp., but Philadelphia's market isn't plagued by large inventory the way Sun Belt cities such as Las Vegas and Phoenix are.

"We have not seen the catastrophic declines in new-home prices or new-home sales that a lot of other areas have," Gillen said.

John Mangano, Toll Bros. group president for Philadelphia, Bucks, and Montgomery Counties, said this market was "holding its own." Sales at Toll's Naval Square, a mix of condos and town houses at 24th and Bainbridge Streets, are strong, and building of single-family houses in the suburbs is steady, he said.

"Of course, everybody knows it's slow," Mangano added, but there are still buyers out there. "People sitting on the fence for a long time are making moves every day."

The Philadelphia market "has never boomed like other areas, and it's never hit the lows of other areas, either," he said.

Toll released its fiscal third-quarter earnings Wednesday, beating analysts' expectations. The company reported net income of $42.1 million, or 25 cents a share, compared with $27.3 million, or 16 cents a share, in the prior-year three months ended July 31. Net income rose 54 percent, helped partly by a $38.2 million tax benefit. Revenue from houses delivered dropped 13 percent, to $394.3 million. The backlog of houses at the end of the quarter increased 8 percent, to $1.02 billion.

"Our sales are gaining some traction, but consumer confidence is still weak, and the housing sector remains in a fragile state," executive chairman Robert I. Toll said.

The Federal Housing Finance Agency reported Wednesday that home prices fell 5.9 percent nationwide in the second quarter from a year earlier, the biggest drop since 2009, as foreclosures added to the inventory of properties for sale. The Mortgage Bankers Association said applications dropped 2.4 percent last week, hitting a 15-year low.