Feature Article

Everything You Know About Philly Real Estate Is Wrong

By Christine Speer

Page 2 of 9

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.

But you still might want to hold off on the schadenfreude. Even in Philly, in the second half of 2007, median home prices dropped for the first time since 2003. Building in some areas of the suburbs and South Jersey slowed by as much as half, with no signs of picking up for at least a year. And though we’re still lower than the national average, the number of Philly-area foreclosures rose, as did the number of delinquent mortgage payments. Sellers are having a harder go of it than they’ve had in years, even in historically desirable places. It is, undeniably, a soft market. (To see how your neighborhood fared, check out our comprehensive chart on page 104.)

“I think Philly — particularly the Main Line — is essentially a recession-proof, economically immune, bulletproof area,” says Lavinia Smerconish, a Prudential Fox & 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.)

What it may mean to you: As Sweet notes, it’s too soon to sound the “all-clear signal” for Philly (particularly when the national economy is shaky). But hey — pat yourself on the back for not buying that $3 million fixer-upper in Modesto two years ago. And an even more useful takeaway: To keep up with Philly real estate news (good or bad), read Philly news, not USA Today.


 

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User comments

It's different here!
Posted by Anonymous | Mar. 2, 2008 at 8:08 AM
COMMENT:
And the disconnect and denial continues. The favorite realtor mantra "It's different here!" is even tried on a derelict city like Philly.
Thanks for the article PhillyMag!
Posted by Remax City Space | Mar. 4, 2008 at 11:15 AM
COMMENT:
We'll be asking all of our nervous clients who have fallen prey to Mr. Lauer's bubble bursting charms to pick up a copy of the March Issue.
Finally, the truth and numbers are in writing!
Posted by Ryan Quinn | Mar. 5, 2008 at 8:27 PM
COMMENT:
I want to thank the Philadelphia Magazine for doing this article and letting the home owners of Philadelphia know what's going on in our specific market. These are the things that I've been saying for quite sometime. THANKS!
Reversal of Fortune?
Posted by Sandy Bennett | Mar. 6, 2008 at 5:23 AM
COMMENT:
Interesting but highly-expected tactic by Ms. Smerconish and her ilk. Now who, among the well-heeled, BMW-driving realtors, will explain to the Philly area populace just how logical it is to see the obscene increase in prices over the last 6 years? Game time over. Better start looking to lease a Volkswagon, Ms. S.
Well, Of Course....
Posted by Herb Zimmerman | Mar. 8, 2008 at 9:39 PM
COMMENT:
Let us not forget that Lavinia Smerconish (How Matt Lauer Is Wrecking the Philly Real Estate Market, March 2008) has a couple of very good reasons to "talk up the real estate market". For one, the more homes that sell the more she is likely to pocket. And, likewise, the more they sell for, the more she makes. Of course, she wants to paint as bullish a picture of the real estate landscape as she possibly can. Have you ever heard a Real Estate Agent paint a negative picture?
and....
Posted by ben franklin | Mar. 9, 2008 at 9:05 AM
COMMENT:
recession is local too, right?
Reality at its best
Posted by Thea Stinnett | Mar. 9, 2008 at 3:51 PM
COMMENT:
It is wonderful to finaly have the facts about the current real estate market published for the the public to see. Media is doing a good job with scaring people out of making a good investment in real estate. Thank you for writing this article. I hope it gets people to call their local Realtor for information about the market in their area. Realtors have the facts.
^^^Facts?^^^
Posted by Anonymous | Mar. 10, 2008 at 8:29 AM
COMMENT:
There was hardly anything factual about this article. "Realtors have the facts" - are you on crack? Realtors have the same incentive as any other salesperson does - making money and generating business. What a load of BS. On a side note to the editor, will you please rename this magazine Main Line Today, because really, it's the same thing.
Thea Stinnett is a Bucks Cty. Realtor
Posted by Anonymous | Mar. 10, 2008 at 8:45 AM
COMMENT:
Realtors obviously do know best when it comes to marketing themselves.
Real Estate Article Backs Right on to Gay Sex Parlors Article
Posted by Anonymous | Mar. 14, 2008 at 9:19 AM
COMMENT:
Got the March Issue because of the Philly Real Estate article - wanted to pull out the article and tables of home prices to discuss with others, just right up until I realized a photo of a half naked man with a provokative headline about gay sex parlors was on the back of the last page of tables. You couldn't have separated those articles by an advertisement? And since I live in one of the towns on that last page of tables, the part that pertains to me was unusable and could not be shared. Thanks for being so sensitive to that part of the population who isn't on the edge of their seats regarding sex parlor real estate. Most of us are only interested in the real estate that our sofa sits on!
transaction costs
Posted by Jamalogist . | Mar. 16, 2008 at 12:09 PM
COMMENT:
Don't forget, prices here don't actually have to drop at all, for someone to lose when it comes time to sell. Thanks to the 2% buy / 2% sell transfer tax, you will lose 4% even if prices remain completely flat. Combined with 6% broker fee, 1% title insurance, that's 11% right there, even if you sell exactly for the same price. Still think it's a rosy picture?
Rosey Picture
Posted by Savannah Stiles | Apr. 28, 2008 at 9:00 AM
COMMENT:
Its 2% total transfer tax (1% to buyer, 1% seller), not 4%. Also, if you are smart, you won't pay 6% in commissions. Some realtors are dropping their commissions to 5% in order to compete with discount brokers like Assist.2.Sell who will sell for as low as 4% or 1.5%. Buyers are saving money now that mortgage rates are under 6%. And many companies also offer seller and buyer rebates, saving their clients $1,000s more! Its not a rosey picture, but it sure isn't the slippery slope that some people are portraying. And another note: not all realtors are money sucking fact distortors, expecially in this market. I care about my clients and my reputation. If all I cared about was money, I would switch to something like car sales.

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