City’s real estate market sees similar trend
Philadelphia’s forecast: 2005 was on fire – the median price was up 32% – but things are slowing.By Alan J. HeavensInquirer Real Estate Writer<br /><br />Can Philadelphia have too many million-dollar high-rise condos?<br /><br />As the city’s real estate market slows along with those of the region’s and the nation’s, some local observers say that high-end housing seems poised to take the biggest hit.<br /><br />”<a href=”http://www.fredglick.com”>It’s my gold-faucet condo theory,” said Fred Glick, president of US Loans Mortgage L.L.C. in Old City. </a>”Ten separate developers hire consultants who tell them to build high-end, high-rise condo buildings, and 10 different shovels go into the ground. When you look closer at the market, there are only enough buyers for five of them.”<br /><br />Said Mark Wade, an agent with Prudential Fox & Roach: “People who buy million-dollar condos don’t really need them… . The majority of city buyers, however, are in the $200,000 to $500,000 range, because their first priority is shelter, not luxury lifestyle.”<br /><br />Symphony House developer Carl Dranoff doesn’t completely agree. “There’s always a market for expensive units at great locations,” he said.<br /><br />What Dranoff didn’t say, however, was that some locations are better than others, and that some higher-end projects are being built in places that might better accommodate mid-price buyers.<br /><br />Real estate agents say they are seeing a summer slowdown in sales in all price ranges for the first time in two years – despite an active spring and a record 2005 market that saw the city’s median price soar 32 percent, to $120,000, nearly twice the previous year’s increase, according to The Inquirer’s analysis of 95,000 home sales in the eight-county region.<br /><br />Each of the city’s 46 zip codes that had residential sales showed median-price gains last year over 2004, the analysis showed. (The median is the middle value; half the houses sold for more, half sold for less.)<br /><br />As a result of the current slowdown, city listings are climbing into the thousands of units. And, with interest rates heading upward, buyers have been losing that sense of urgency that they need to buy a particular house now.<br /><br />”For the first time in years, buyers are low-balling offers and then moving on to the next house when the seller won’t budge,” Wade said.<br /><br />Chris Artur, owner of Artur Realty, who sells in the Northeast, said, “I’m seeing expired listings for the first time in five years.”<br /><br />Chris Ryan, a Prudential Fox & Roach agent in the Art Museum area, said it is finally sinking in with sellers that the market has changed.<br /><br />He cited this example: A 3,000-square-foot house needing work was listed at $525,000, and the buyers agreed to pay it. After a home inspection, they wanted a $50,000 reduction, and the seller refused. The buyers walked away. The house languished until the same buyers returned and offered $450,000. The seller counteroffered with the $475,000 the buyers offered before. Final sale price: $462,000.<br /><br />”There is so much on the market, and buyers are shopping,” Ryan said.<br />What Philadelphia is seeing is decidedly not a bubble.<br /><br />”As long as the economy continues to create jobs and builders trim production to match slowing demand, house prices will keep climbing and the housing sector will likely achieve a soft landing,” said Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard University. “Although house-price growth will likely moderate in many areas, sharp drops in house prices are unlikely anytime soon.”<br /><br />Because of the minimal impact of short-term investors in the Philadelphia market – they’re typically the first to jump ship when rising interest rates cut off the avenue to quick profits – Mark Zandi, chief economist at Moody’s Economy.com in West Chester, said he expects continued yet modest growth in city prices this year.<br /><br />Although investors have played a major role in pushing up prices in many neighborhoods in the Northeast, Artur said, higher prices have cut the number of them by about 50 percent and sent them down to the Kensington area.<br /><br />”We are now about one-third investors and two-thirds first-time buyers, but a lot of those buyers come with credit problems that need to be addressed, even though lenders will still give you 100 percent if all you have is a pulse,” he said.<br /><br />In areas without investors, such as Bustleton, sales of detached houses appear to be slowing because the houses are overpriced, and “it’s taking a while to get these sellers to look at reality,” Artur said.<br /><br />The long term for the Philadelphia market still looks good, even if, as Center City Realtor Allan Domb insisted, “half of the projects planned likely will never be built.”<br />Said Glick: “No matter what the economy looks like, we always have Penn and the health-care industries.<br /><br />”Even though we appear to have lost 50,000 jobs and people since the 2000 census, the people who have been coming in since 2000 have higher incomes and can afford to buy.”<br /><br />Contact real estate writer Alan J. Heavens at 215-854-2472 or <a href=”mailto:email@example.com”>firstname.lastname@example.org</a>. Inquirer staff writer Alletta Emeno contributed to this article.