James Yoakum

This article from Realtor.org ranks Philadelphia the 2nd best city in the nation for recent college grads - behind Indianapolis which seems to have stolen it's #1 spot because of dirt cheap rents. To anyone living in Philadelphia it's obvious that there are plenty of college and post-college aged folks around, and thankfully we're getting some recognition for it.

Additionally, the rent for a one-bedroom apartment in Indianapolis could cover the mortgage on a nice 3br house in some of Philly's hippest post-college neighborhoods. Not only does the City of Brother Love offer the lifestyle and jobs that recent grads demand, but with the affordability of our housing stock it allows them to become homeowners and start building wealth much earlier than most other locales on the list.

Some of the best data you can get on the Philadelphia housing market came out last week and can be seen by clicking here. I've been following these reports for a while and they always give a great picture of how Philadelphia's housing market is moving on a neighborhood-by-neighborhood basis. Some of the big takeaways from this quarters report are:

1. Philadelphia's housing stock is now considered undervalued. Granted only by one percent, but that figure, based on the affordability of housing relative to income and rental costs, gives us some indication that current house prices make sense from a fundamentals perspective.

2. All the neighborhoods lost value last quarter! Until now it seems like there were always one or two neighborhoods holding on to meager quarterly price gains. I think this speaks to the psychology of the market - even in the best neighborhoods buyers are only buying properties that they feel they're getting a great deal on and properties without bargain pricing don't sell which means they don't show up in this data.

3. We're still outperforming most major cities in terms of holding onto our gains from the run-up in real estate prices. The main reason for this is that our run-up wasn't as steep, but let's celebrate because it's a rare occassion for Philadelphia to be on the good end of any city rankings! (Although lately we've been doing well making lists of most walkable, greenest, etc.)

A few years ago when the 2006 Census data was released, Philadelphia received a major ego-blow as Phoenix, AZ passed us to become the nation's fifth-largest city by population. Well, after this article in today's NYTimes, Philadelphians can take solace in the fact that some of Phoenix's growth over the past decades came at the expense of massively inflating prices in that region's housing market. According to the most recent release of the Case Shiller Home Price Index, Phoenix home prices are down 50.8% since that market's peak in June 2006. While the Case Shiller index does not track Philadelphia home prices, it's safe to say that our region has fared much better over the course of the past few years - according to MLS data the average price in March 2009 was down only 16.7% from June 2006.

A couple reasons reasons we can point to for Philadelphia's relative stability, even in the face of continued population decline, are:

1. A diversified economy with concentrations of recession resistent industries such as education, healthcare, and pharmaceuticals.

2. A comprehensive public-transit system and walkable neighborhoods that cushioned the blow of last year's high gas prices - assuming high gas prices return, car-dependent cities like Phoenix will become less attractive as commuting becomes more expensive.

3. A 'slow-but-steady' approach to development that prevented us from building too much new housing during the boom times. While there are instances of overbuilding in Philadelphia, most of them can be attributed to developers who didn't understand the local market. Those who built quality product for middle-income Philadelphians are still doing just fine.

Now, if the Phillies can win another World Series title I think Philadelphia will be fully relieved of any Phoenix envy...

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.