What Is Your Home Worth?

Clearing the Record:

In the annual home-price survey published in The Inquirer on Sept. 23, the median price for Yeadon, Delaware County, was shown to have dropped 47 percent from 2005 to 2006. Based on our discovery of an unusual circumstance, we have recalculated sales data for Yeadon, which now shows a 15 percent increase during that same period.
Our annual survey of sales in the eight-county Philadelphia area is prepared using information obtained from the city, the suburban counties in Pennsylvania, and the State of New Jersey.
In analyzing sales in Yeadon, the numbers showed that 177 condominiums had been sold en masse in 2006, for roughly $39,000 each, lowering the median price for all homes sold there to $60,000, from $113,500 in 2005. (The median price is the middle value — half the homes sell for more, half for less.)
But it has became apparent that the sales numbers — while accurate — did not tell the whole story. It turns out that the condos sold, registered in the Delaware County data as individual transactions, were not actually condos, but rental apartments.
Yeadon Borough Manager Peter Brusco explained that about a dozen years ago, the owner of the property, an apartment complex known as Revere Crossing, had hoped to convert the rental units to condos and had the units officially designated as such. County officials confirmed the units were still on the books as condominiums.
Because we exclude apartments from our price survey, as well as anything that is an arms-length transaction — for example, a $1 transfer of a house from a mother to a son — we have recalculated Yeadon's 2006 numbers based on 195 sales, up from 185 in 2005.
The median price was $130,000, an increase of 15 percent over 2005's median of $113,500.
-  Joanne McLaughlin
Real Estate editor

Portents of economic doom darken the national real estate picture daily. Between subpar housing-start numbers, the subprime-mortgage debacle, and crashing prices in California, Nevada and Florida, it's hard to find good news anywhere.

Anywhere but here, it seems.

Observers of the local real estate market say the eight-county Philadelphia region has so far managed to dodge the crashing prices that have beset some other major U.S. metropolitan areas.

Clearly, the yearly double-digit price increases and same-day sales that characterized the hot market of 2000 to 2005 are over.

But an Inquirer review of home-sales data for 2006 and the first eight months of 2007 shows prices here are holding steady or rising slightly, even as sales volume drops and time on the market ticks up.

"While the market has cooled, we have yet to see any significant price declines - yet," said Kevin C. Gillen, a Wharton School research fellow and vice president of Econsult, a Philadelphia economic-consulting firm.

For sellers, that's the upside. For buyers, it's the wide selection of houses to choose from.

"This is a market you can take your time with," said Steve Storti, senior vice president for marketing with Prudential Fox & Roach Realtors. "With so much for sale, there is not an extreme sense of urgency about buying now - because you might miss out on a better house."

During the last seven quarters, the data show, median-price increases in the eight counties ranged from 0.6 percent in Bucks County to 11 percent in Chester County. That followed two years of increases ranging from 9 to 17 percent in the suburbs - levels that had not been seen since the real estate boom of the mid-1980s. (The median is the middle value: Half the houses sold for more, half for less.)

The number of days a house spends on the market before it sells continued to climb, though. Currently, the data show, the regionwide average is 66 days, up from 53 last September.

What makes the Philadelphia area less vulnerable to the huge fluctuations in home prices that other parts of the country are experiencing?

Lots of people aren't moving into the region, as they are in Las Vegas, Florida and Southern California. The result, Storti said, is that we are not trying to anticipate demand by building speculative housing, as those areas have.

This region's diverse economy is not dependent on home construction. The local staples - health care, pharmaceuticals and education - all are growing service industries.

People here tend to be conservative about how they finance home purchases. An Inquirer analysis of Home Mortgage Disclosure Act data shows that subprime loans are not as prevalent in the eight-county region as they are in comparable metropolitan areas.

Compared with other parts of the country, the number of foreclosures and mortgages in delinquency relative to the number of loans is low here, according to data from the Mortgage Bankers Association and RealtyTrac, which tracks foreclosures.

No one is willing to predict how long this region can stay above the national fray, although in the 20 years The Inquirer has been analyzing home prices, the words flat and stable have been most often applied to this market.

"It will be a while before we hit the turning point," Gillen said. "There are still a number of major adjustable-rate mortgage resets coming over the next six to eight months, which will determine how long it takes the lenders to stabilize themselves.

"With national credit conditions becoming tighter" even as long-term fixed interest rates decline, he added, "this will affect local conditions here, regardless of what we can do about our own market."

Based on The Inquirer's analysis of more than 275,000 home sales in 2005 and 2006 and a subsequent review of Trend Multiple Listing Service data through Sept. 10 this year, median prices in the region clearly demonstrate that no bubble has burst.

Using information obtained from the city, the Pennsylvania suburban counties, and the New Jersey Division of Taxation, The Inquirer analyzed home-sale prices for the eight-county region and three Shore counties (Atlantic, Cape May and Ocean). The analysis revealed that:

Three-quarters of the communities in the four Pennsylvania suburban counties saw median prices rise in 2006. The median price overall increased 2 percent, to $270,000 from $265,000, compared with an 11 percent rise in 2005. Of the 238 Pennsylvania municipalities included, 150 had fewer sales.

Philadelphia's median price in 2006 was $130,000, an 8 percent increase from $120,000 in 2005, but far below the 32 percent rise in 2005.

In Burlington, Camden and Gloucester Counties, the overall median price for 2006 was $200,000, a 7 percent increase over the 2005 median of $187,000. In 2005, the median increased 17 percent over 2004. Median prices rose in 81 towns (87 percent) in 2006; in 2005, 99 percent of towns had a growth in median price. Seventy-nine of 98 municipalities included had fewer sales

At the Jersey Shore, roughly three-quarters of the communities in Atlantic, Cape May and Ocean Counties saw median-price increases over 2005. Overall, the median price was $275,000, a 4 percent increase - but down from the 16 percent increase posted in 2005 and the 21 percent recorded in 2004.

No single town or city neighborhood shone in each of the Big Three categories: highest median price, highest growth in median price, and highest growth in sales. But Newtown Borough, Bucks County, finished tops for highest regional median price ($863,588) and second for growth in median price (up 119 percent in 2006).

Finishing strong for median price and year-to-year growth in sales volume were Newlin Township, Chester County ($845,400, 85 percent growth in the number of sales); South Harrison Township, Gloucester County ($375,000, 44 percent sales growth); and the Center City West zip codes 19102 and 19103 ($360,000 and $324,800, 82 percent and 69 percent sales growth).

The municipal and Multiple Listing Service data reviewed show that in 2006 and thus far in 2007, sales of existing homes dropped to slightly below the level of 2003 - the midpoint in the so-called "hot market" of 2000-05. The number of houses available increased as a result, as did the average number of days it took to sell a house.

Sales of new homes - which typically drive median prices higher in a town - also declined, forcing suburban builders to turn to incentives and focus on smaller and less-expensive attached houses.

So far, the strategy seems to be working, with the number of new homes for sale lower in 2007 than in 2006, said Wayne Norris, regional sales director of Hanley Wood Market Intelligence, which tracks those sales and provided the 2007 data.

Still, the perception that the national housing malaise has infected this region is having an impact, observers said.

"Chalk it up to the infrequent nature of the real estate business," said Prudential Fox & Roach's Storti. "Buying a home is either elective [you want to] or based on need [you're relocating]. If your perception of the real estate market is colored by the extremes that the media cover, then you aren't going to see the differences."

Thus, buyers who don't need a new house aren't rushing out to look for one.

There certainly was no sense of urgency for Ellen Shimberg and Will deBlecourt in 2006 when they decided to put their three-bedroom, 11/2-bath Haddonfield house on the market and look for a bigger house in Cherry Hill, where property taxes also are lower.

"We figured that if we priced the Haddonfield house to sell, it would sell quickly," Shimberg said. "We knew that if we had sold it two years before, we could have gotten more money for it, but we weren't ready to move, and there weren't that many houses on the market to look at anyway."

Their house sold in two weeks, but that buyer didn't qualify for a mortgage. Three weeks later, the house sold again, for $375,000 - not the original list price, "but we met our bottom line on what we would accept," Shimberg said.

They looked at 20 to 25 houses in Cherry Hill, finally settling on the $333,000 four-bedroom, 21/2-bath house they moved into in March. "I found the process relatively painless," Shimberg said.

First-time home buyers, turned off by what, in many cases, were indefensibly high asking prices, began sitting on the sidelines in 2005. But they have started to drift back in some areas, real estate agents and builders say.

What is clear from all the regional data is that a lot of people are still buying houses. In fact, more than 87,000 changed hands in 2006 in the eight metropolitan Philadelphia counties. The peak year of the recent real estate boom was 2004, with 96,184 sales, followed by 95,108 in 2005.

In the context of the last 20 years, today's sales numbers are extraordinary, observers said, considering that population growth here lags behind "hotter" - and now more chaotic - markets nationwide.

In 1998, for example, 75,402 houses changed hands in the eight counties. That was 2,000 fewer houses than what was then the all-time high, 77,530 sold in 1987. In the depths of the last real estate slump, in 1991, only 47,600 houses sold regionwide.

Main Line broker John Duffy said there was no comparison between that 1990s slump and now. He thinks that a lot of "elective" buyers are waiting for prices to drop, and that it isn't going to happen.

Yet the problem isn't just with hesitant buyers.

"There are still a lot of sellers who want us to list their houses for any number they come up with, and we just won't take the listing," said Duffy, who owns Duffy Real Estate in Narberth and Wayne.

The sooner sellers and agents allow prices to become more rational, the sooner sales will pick up, Econsult's Gillen said.

According to a second-quarter survey of median prices in 330 U.S. metropolitan areas by National City/Global Insights, the Philadelphia region's prices were overvalued 13.5 percent, compared with Miami's 59 percent and Las Vegas' 31 percent.

The ratings are based on price movements relative to a region's changes in income, interest rates, rents and population. They are not a predictor of how much prices might deflate. The Philadelphia region's rating simply means home prices here are 13.5 percent too high when the other factors are considered.

Though Gillen was unwilling to predict what prices would do down the road, he noted, "Even if we do experience a meaningful price deflation, that isn't necessarily an overall bad thing, because it increases housing affordability and accessibility for [the region's] population."

It's difficult to predict short-term fluctuations, Gillen said, "because the near term is as much dominated by buyer-seller psychology . . . as it is by fundamental forces."

"To paraphrase Dr. McCoy from Star Trek, 'I'm an economist, Jim, not a mind reader.' "

The Inquirer's home-price analysis was based on more than 275,000 residential sales in 2005 and 2006. Sale information was obtained from the five Pennsylvania counties and the New Jersey Division of Taxation.

Only sales at fair-market prices of $10,000 or greater were included in the analysis of single-family homes, condominiums, townhouses and twins, or duplexes.

The median price is the amount at which half the sale prices were more and half were less. The percentage change reflects the difference in the median price from 2005 to 2006.

A town with fewer than 10 sales is marked "N.C." because the median and percentage change were not calculated. Towns with no sales are marked "N.S."

All numbers are rounded to the closest whole number.

Supplementary data for 2007 were provided by Hanley Wood Market Intelligence (new-home sales) and Re/Max and Prudential Fox & Roach's HomExpert Market Report (existing-home sales, based on Trend Multiple Listing Service figures).

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To see interactive maps of home- price and sales data for the region, go to http://go.philly.com/homeprice

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