Feature Article

Everything You Know About Philly Real Estate Is Wrong

By Christine Speer

Page 6 of 9

What it may mean to you: House-hunting. “The best opportunity to buy is when people think it’s the darkest,” Domb says. “Right now, people probably think it’s close to the darkest.”


PERCEPTION 6.
So what if house prices are low? It’s too hard to get a decent mortgage nowadays.

The Philly reality: The perception of mortgage difficulty, says Jason Schaeffer, president of South Jersey builder Tim Schaeffer Communities, stems from an affordability problem — the exact thing that kicked off the sub-prime mess.

“For the past few years, people were getting these crazy mortgages that they couldn’t afford,” he says. “Now, that’s stopped, and the pendulum has swung the other way, and underwriters are erring on the side of conservatism. In the end, people who can afford homes are getting them, no problem, and people who can’t, or who are on the cusp, aren’t.”

So while, yes, lenders have raised their standards when it comes to who gets money, the process remains case-by-case. Many of the people having problems are “the ones who have been late with mortgage payments, or people with high credit-card debt that they’re not on time paying,” Iezzi says. For most conventional buyers, he adds, there is money available, including jumbo mortgages (loans exceeding $417,000) and loans for second and third homes.

And another thing: Current interest rates are the lowest they’ve been in years. “I remember, growing up, that if the mortgage rates would drop just below eight percent, my parents would say it was a good time to buy,” Smerconish says. The rate for a 30-year fixed mortgage at press time was 5.67 percent. “Now seems to be a magic witching time to buy.”

What it may mean to you: The loan you want, with a super-low interest rate to boot. Seriously. 


PERCEPTION 7.
The Shore: One big hot mess.

The reality: This perception grows from a deep-rooted truth: The rules that dictate the Philly market don’t apply at the Shore, which is heavily influenced by investor buying and largely made up of secondary homes. (In Cape May County, about 80 percent of the homes are classified as vacation homes — compared to 30 percent for Atlantic County, and 15 percent for the national average. Ocean City has more investor — as opposed to resident — share than anywhere in the nation, says Sean Maher, associate economist with Moody’s Economy.com.) And like most areas that experienced rapid increases in home prices and rampant building, parts of the Shore fell hard — with house prices dropping almost twice the national average.

Another key difference at play is the Shore’s relatively stagnant market. “I personally think that even though prices are down a bit already, it’s not a bad idea to sell now, if you plan to sell anytime soon,” Maher says. “In the 1990s, when prices everywhere were dropping, the prices on the Shore stayed flat for a decade. After they bottom out in the next year or so, it will likely be a similar pattern. If investors try to ride it out, it might be a long wait.”


 

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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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