Everything You Know About Philly Real Estate Is Wrong

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.