James Yoakum

As summarized in this article median home prices and the number of home sales in Philadelphia continued to drop in the first quarter of 2009. While this might sound like bad news I contend that it's really a secret weapon for those buyers currently shopping for a property in the area.

The story on the ground is that, in many neighborhoods, prices on individual homes are down much less than the 7.4% year over year drop in the median price suggests. The median is down largely because the mix of homes being sold has shifted from the higher to the lower end. This shift has occurred as first-time buyers have become the market's driving force due to the $8,000 tax credit, attractive financing options, and no need to sell their current home before buying (first-time-buyers don't have a current home by definition). Since first time buyers typically buy less expensive homes than others the median price is bound to go down as they make up a larger piece of the overall market.

Here's the kicker - even though actual values are often not as bad as the median makes it seem, the big drop in the median price is a great way for buyers to support a 'low-ball' offer. When you can use numbers like these to back up an offer it puts you in an excellent bargaining position and can make the difference between getting an average deal and a great deal on your home purchase.

I'd like to announce that as of today I have moved to a new brokerage - Brown McKinney Real Estate Company. I'm very excited about the move and I believe that it will enable me to better serve my clients and continue to provide an unsurpassed level of customer service. Look for more information soon regarding the enhanced services that I will be providing through Brown McKinney.

I always think of Easter weekend as the start of Spring, but this year I'm not sure that means as much for the residential real estate market as it has in years past. Anecdotally, I saw decent volume throughout the first few months of this year, driven by first time buyers and those who saw the long-term value in today's market. However I don't see many signs that sales volumes will pick up much in the Philadelphia area over the summer months. I also don't see any compelling reasons for those buyers who have been on the fence until now to jump in just because it's getting warmer - there are no new tax incentives beyond the first-time buyer credit that's been out for a few months now, and interest rates don't seem to be able to get into the low 4%'s. One troubling statistic I noticed is that days on market (DOM) for Philadelphia County actually climbed significantly as we got closer to Spring this year - from an average of 70 in November to 74 in February to 83 in March. In healthier markets the biggest dropoff in DOM has often been between March and April, so I will be watching those statistics closely to decide if I should expect another spring and summer with fall and winter sales volumes.

The silver lining in this is that those buyers who are out looking this spring will continue to face less competition than in years past and will get to see the beautiful neighborhoods of Philadelphia in all their springtime glory.

I know areas with higher numbers of foreclosures and distressed sales (California, Florida...) are seeing big volume increases, but what about other relatively stable areas of the country? Does anyone have a good sense of whether or not this summer will see the usual 'warm weather sales surge'?

This week, Chris Pummer at Marketwatch.com did a great 3-part series on using self-directed IRA's to invest in real estate which you can read here. I've long thought that this is an excellent way to diversify your retirement savings away from the typical stocks, bonds, and mutual funds and tie your future wealth more solidly to a hard asset, namely real estate. Self directed IRA's are also an often-overlooked source of capital for real estate investing that allows you to avoid tying up your more liquid assets. For savvy real estate investors who are old enough to have a sizeable IRA balance built up but young enough that they don't need to access it for 10-15 years, investing in real estate, be it single family rental homes or NNN leased office or retail properties, is a rock solid retirement saving option.

This NY Times article about banks walking away from foreclosures brings to the forefront what may turn out to be one of the longer-lasting problems created by the foreclosure crisis: messy, tangled titles. When banks walk away from a foreclosure their mortgage lien remains on the property's title, even if they aren't enforcing it. Addtionally, when properties are abandoned by owners, banks, or tenants, municipal liens and fees for unpaid utilities, demolition, or code-violations begin to pile up quickly. In an environment of declining property values these liens can quickly exceed the value of the property by a large margin, discouraging any future attempts to rehabilitate the property.

Even before the crisis, titles ensnared by old, often legally questionable, liens dragged down property values in many of America's post-industrial cities where vacancy and abandonment are not new problems at all. For example, many of the investment properties I deal with in Philadelphia are encumbered by liens far in excess of the properties' value. Many of these properties would be prime candidates for redevelopment by private investors, but when establishing clear title becomes an expensive, lengthy process developers will usually move on to the next property. It's shocking how easy it is to spot properties with tangled titles without even performing a title search - just drive down a street where all the properties are well-maintained or newly renovated and look for the one or two that are totally abandoned. Many times an impossibly tangled title is at fault.

Fortunately most local governments already have systems in place to clear-up tangled titles. Instead of focusing on new programs that offer short-term fixes, the current crisis should prompt local governments to take swift, decisive action to address systemic problems like tangled titles before they grow into the next long-term problem in our property markets.