My Most Recent take on Philly's Market

Just writing to give you a quick update on Philadelphia's real estate market as I've been seeing it over the past few months. Two recent articles, one in the Inquirer (Click Here) and one in the March issue of Philadelphia Magazine have done a good job of explaining that the Philadelphia metro market has not been severely hurt by the 'subprime meltdown' and 'housing crisis' that many other parts of the nation are experiencing. In fact, median home prices rose in Philadelphia in 2007, albeit by a meager 0.7%, and some suburban areas are experiencing even stronger growth such as Delaware County's 8.1% jump from December 2006 to 2007. While median prices get the most press, a second, even more encouraging statistic is that from February 2007 to February 2008 the average residential sale price in Philadelphia rose 11%, showing the influence of a higher proportion of big-ticket sales, many of which are Center City condos.

 

In short, pricing on good quality homes that are marketed well is still relatively strong, although the amount of time it takes to sell has certainly increased. Days on the market in February 2008 averaged 74, up slightly from 71 last February, but up dramatically from 55 in February 2006, and the current inventory for Philadelphia represents a 13 month supply at February's sales pace. However, this 'glut of inventory' is not a sign of pending doom, but an expected consequence of the 150% run-up in prices over the past decade as those who bought five or more years ago look to cash in on this appreciation, and it provides the chance for buyers to cross-shop numerous properties in any given neighborhood and choose only the best.

 

While strong fundamentals like job growth, relative affordability, and high quality of life have insulated the Philly market somewhat, the effects of the national downturn did hit later here than in other areas, only starting to show up in data for the last quarter of 2007. Therefore it seems like we're still in a slow decline and even with the usual spring pickup in sales it may be the third or fourth quarter of this year before the market reaches a level of balance between buyers and sellers.

 

The main point of all this is that we're still in a serious buyers' market and there's still time and plenty of inventory to find great value-priced properties for investors or end-users. There's also an argument for selling now in certain stronger neighborhoods because although you may not get the absolute peak price for selling you can realize immense savings by buying a replacement property in the current low-interest-rate, high-seller-concession, bargain-pricing environment. Additionally, recent federal government incentive packages, while having little direct effect on our market, should generate enough good press to bring a few reluctant buyers off the fence.

 

I see the following as things to be optimistic about in Philadelphia and all of these can point to great real estate investment strategies:

• Continued job growth in the typically recession-resistant fields of healthcare, education, and pharmaceuticals.
• Massive public and private investments in the two planned casinos and the entire Delaware riverfront, the Convention Center expansion, UPenn's eastward expansion, the Navy Yard redevelopment, the Wachovia Spectrum site redevelopment, and the list goes on and on.
• A very strong rental market.
• Strong and improving office market fundamentals in the Central Business District.
• Optimism about the new mayoral administration.
• Value home pricing and a great cost-of-living compared to D.C., New York, and other competing markets.

Overall it's a perfect time to buy, invest, or refinance and even if you're on the selling end of things I'd love to talk to you about the best strategy for surviving the current market. I hope to hear from you soon, and feel free to refer any friends or family my way!

 

Cheers,

James

 

p.s. For an excellent, in depth, look at real estate prices and trends in Philadelphia with a neighborhood-by-neighborhood breakdown see Kevin Gillen's latest report here.