Philadelphia shows a price gain!
Portrait of a slowdown<br />The HomExpert quarterly report shows fewer sales, flat prices.<br />By Alan J. Heavens, Inquirer Real Estate Writer<br /><br />Sales of existing homes in the eight-county Philadelphia region were down about 10 percent in the third quarter from the same period in 2006, and median sale prices generally were flat, data from Prudential Fox & Roach’s HomExpert Market Report show.<br /><br />Median prices in the five Pennsylvania counties were 1.9 percent higher in the third quarter over the same period last year, the data show, but rose 6 percent in the South Jersey counties.<br />Philadelphia itself, the engine that drove the real estate boom of 2000-2005, saw a median price gain of 0.3 percent in the period, the data show; Center City prices were up 6.3 percent.<br />Montgomery and Burlington Counties saw no median-price gain. Camden County sale prices dropped 2.0 percent from the third quarter of 2006, which real estate agents there attributed to a parallel drop in sales of higher-price houses from the year-ago period.<br /><br />In the four other counties, price increases ranged from 1.8 percent in Chester to 6.2 percent in Gloucester.<br /><br />Third-quarter new-home data will be available early next month from Hanley-Wood Market Intelligence, which tracks that market.<br /><br />The Office of Federal Housing Enterprise Oversight will not have its third-quarter home-price index available until Nov. 30. (Philadelphia is not one of the 20 cities covered by Standard & Poor’s/Case-Shiller Metro Area Home Price Indices.)<br /><br />The third quarter covers July 1 to Sept. 30, a typically slow period for existing-home sales. But much of what is in the HomExpert report, which is based on Multiple Listing Service data, reflects activity in the previous quarter because it can take 30 to 90 days from an agreement of sale to closing.<br /><br />Since the previous quarter – March 1 through June 30 – covered the spring market, which remains the peak selling season, the data could mean that sales and prices are finally bottoming out, observers of the local market said – or they could be a harbinger of a downward trend.<br />Nine-month existing-home numbers are not often used as a measure of a market’s health, but they show only a single-digit decline in year-over-year sales volume for Pennsylvania and a drop in the low teens for the South Jersey counties.<br /><br />More and more, the industry is looking at pending sales – when a contract has been signed but the transaction has not yet closed – as a measure of the current market.<br />HomExpert’s pending-sales index for August showed a substantial decrease in activity from July that was not unexpected.<br /><br />”We had anticipated a decrease in the region’s activity due to the heightened awareness of the credit crisis and mortgage availability,” said Steve Storti, senior vice president of marketing for Prudential Fox & Roach. “Now that the Federal Reserve has begun lowering interest rates and there are wide reports that the credit problem has eased, we are hopeful that the market will begin to improve over the next few months.”<br /><br />Lawrence Yun, senior economist for the National Association of Realtors, agreed that widening credit availability would help turn home sales around.<br /><br />”Conforming loans are abundantly available at historically favorable mortgage rates,” Yun said. “Pricing has steadily improved on jumbo mortgages [over $417,000] since the August credit crunch, and FHA loans are replacing subprime mortgages.”<br /><br />According to Freddie Mac, the 30-year fixed interest rate is hovering around 6.5 percent, and short-term rates could back down a bit in the next couple of months, depending on what the Federal Reserve’s Open Market Committee does when it meets Wednesday and Thursday.<br />Financial markets are “looking for about a 30 percent chance of a 25-basis-point rate cut rather than the 50 percent chance that they had previously expected,” said Frank Nothaft, Freddie Mac’s chief economist.<br /><br />On the positive side, Yun said, “speculative excesses have been removed from the market, and prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”<br />”All real estate is local,” he noted, “with naturally large variations within a given area.”<br /><br />A few municipalities – Haddonfield and Camden, for example – saw sales and median prices increase in the third quarter of 2007 from the same 2006 period. But sales were lower in most communities, while median prices were up or level with the 2006 third quarter.<br />One continued positive is this area’s condo market. According to Delta Associates of Alexandria, Va., which tracks the Middle Atlantic region among others, the third-quarter supply of 5,400 unsold units provides a 2.6-year inventory. The city’s ratio is slightly better, 2.5 years.<br />Still nagging the local market is the absence of first-time buyers, and there are two major reasons for that, local observers said: continuing price increases and fears that financing isn’t available.<br /><br />First-time buyers “are critical to the health of the market because without [them] current owners who want to trade up to bigger, more expensive houses can’t move,” said John Duffy, broker/owner of Duffy Real Estate in Narberth and Wayne.<br /><br /><strong>Fred Glick, a mortgage broker/Realtor in Old City, said many buyers, especially first-timers, have been discouraged by the subprime crisis and foreclosure fears.</strong><br /><br /><strong>”There is still 100-percent financing available, and with a conventional mortgage,” said Glick, “as well as Fannie Mae and Freddie Mac programs for first-time buyers.”</strong><br /><strong></strong><br />Some local observers have questioned HomExpert’s days-on-market averages, which in the third quarter ranged from 53 to 75. To “freshen” a listing, they say, some agents and brokers remove houses from the Multiple Listing Service for a few days, then re-list them at lower prices, to give them the appearance of being new to the market.<br /><br />Tim Crann, a veteran appraiser who handles properties in the five Pennsylvania counties, said he has seen many examples of this “resetting the DOM clock,” and believed that the actual days-on-market figure for many houses was much higher.<br /><br />Though the typical buyer had no access to this information except through an agent, Duffy said, “There’s an easy way for agents and appraisers to obtain a complete history of these properties to determine accurately the days on market.”<br /><br />Storti said he discussed the issue with the firm that analyzes data for HomExpert.<br />”Their analysis tells them that manipulation at the broker level of re-listing does not have a significant effect . . . on days on market,” he said. Some local Realtors agreed.<br /><br />”In previous years,” Storti said, “it was easy to make something look new and reduce the average days on market, but not anymore. Safeguards at the MLS level, particularly in a tech-sophisticated market like ours, prevents the vast majority of false ‘new’ listings.<br />”So the days-on-market number is a true reading.”