‘Equilibrium Isn’t Expected To Continue’ Philadelphia
A housing report from the Philadelphia Inquirer. “Call it a chill, call it a lull, but don’t describe the Center City housing market as a ‘bubble about to burst. At least not to Paul Levy, president of the Center City District. Center City has shown it has the ability to annually absorb 1,500 to 1,800 new units of owned and rental housing. ‘The sky is not falling,’ Levy said.”
“Levy argued that recent announcements that several Center City condominium projects had been put on hold had been exaggerated in the media as evidence that Center City’s hot residential real estate market was a bubble about to burst. Among major projects put on hold within the last two months are the 30-story Marina View Towers, a second luxury condo tower south of Penn’s Landing, and Opus Group’s proposed condominium tower.”
“Levy, however, argued that these developers were only following the normal cycle of supply and demand. ‘This doesn’t mean they are abandoning these projects,’ he said. ‘It just means they’re not going forward in this cycle.’”
“Even with a lull, the report notes, construction of new housing units in Center City increased 12 percent from 2004 to 2005. At 2006’s current pace, 1,932 new units by Sept. 1 and an additional 1,189 completed by year end, Levy said Center City will see a 59 percent increase in completed units over last year.”
“Levy said his optimism was also founded on results of a survey showing that Center City’s new homeowners are different from the buyers in other major cities.”
“As reports center on a housing bubble that is beginning to fizzle in red hot markets such as parts of Florida, Arizona, Las Vegas and Northern Virginia, Levy predicted Philadelphia will not dramatically suffer from the cooling market but ease into it. ‘The demand for Center City housing is quite strong and quite sustainable,’ Levy said. In fact, he blamed ‘media hyperbole’ for promoting the idea of a so-called ‘bursting bubble.’”
“Though the city has managed to absorb the new construction at a rate of 1,500 to 1,800 housing units per year in recent years, it’s projected there will 3,121 new units in 2006, 3,269 in 2007 and 3,211 in 2008. It noted real estate experts predict just 20 percent to 30 percent of announced projects that have not yet started construction will move forward in the near term.”
“The ‘equilibrium’ experienced in the market, where supply meets demand, isn’t expected to continue, he said. Philadelphia developers have already begun to react to those trends, Levy said. Levy also said that developers who initially intended to construct housing may react to the market cycle as well as demand and instead proceed with those projects in another form, such as a hotel or rental housing.”
Check out the graphs of current and projected housing at the Inquirer link, on the right.
LOL. Chuckleheaded comments like Levy’s makes visiting this blog so worthwhile.
“Levy said his optimism was also founded on results of a survey showing that Center City’s new homeowners are different from the buyers in other major cities.”
Yeah, so how much dumber are they ?
That’s obviously not true. CNBC just had an orlando real estate reporter and, and it’s different THERE — not Philadelphia.
If anyone has any info on the Philly environment, I would be interested to hear…Even if it is just your observation.
Philly has the whole range of demographics. There’s the wealthy on the main line/by the art museum/in the old, historic sections…there’s the blue collar folk in the northeast and south philly…there’s the very poor in north and west philly. Mixed in are your middle/upper middle class.
Center City is the working area (much like the Loop in Chicago). Penn’s Landing is on the Delaware River and has been being developed for years. There are lots of bars down there and more and more condo developments. (Note that there is also a lot of crime.)
As someone who used to work in the city, I can say that unless you are in a very lucrative industry (i.e. finance, law, etc.) most of the white collar working folk down there will not be able to afford these condos. Nor, do I believe, will the city employees (police, etc.). I kind of think Philly keeps trying and trying to compete with the “big boys” (NYC, Chicago, LA, etc.) but just never quite gets their kite up in the air.
Additionally I will add this. I was born and raised just outside of the city. Philly is ok. Love the history. Like the location in reference to taking day trips to places like NYC, Baltimore, the Jersey shore, the Poconos. Great hospitals and universities. And more. But I never felt the draw to live downtown. I worked down there for years. I definitely partied down there a lot. But it never drew me, personally, in as far as living down there (unlike Chicago did when I moved out there in my 20s).
That’s my personal take on it. An ok city. Gotta’ respect it as the birthplace of our nation. But never gonna’ win best place to live.
Unlike some cities both gay men and lesbians gather in the same area which is in and around the city center. As LGBT destinations go Philly is not a serious hot spot, but it does have a level of cultural flair and amenities that seems eternally out of Baltimore’s reach. It seems like Philly has an old school backbone of wealth keepers, not wealth makers which you can kind of see in the extremely low rate of construction with only two new office towers in the last few decades while other places were breaking out in a rash with trendy cubicle hives.
Cultural flair and amenities: great restaurants, lots of history and art, many art schools and universities. When I lived in the city my out of town friends were surprised when we walked through neighborhoods like Society Hill and Delancey Place, I guess my friends thought Philadelphia was one big grey industrial “hole”.
That being said, there are too many new condos, they are overpriced, and crime has increased since Ed Rendell left office. I used to be a city girl but now it’s just a nice place to visit. Not enough trees.
Definitely on its way, then, to a whole new level of civilization.
That is a strange response.
If Philly functions as a refuge for some groups long associated with gentrification then maybe that might help to explain why it has outperformed the “hole” status assigned by some? Just a thought. Maybe it really is behind Baltimore and I missed something there.
The other statement I made was about long term stagnation. How one gets from long term ongoing stagnation to being on the way to a whole level of civilization is not clear.
It sounds like this is just more obnoxious and useless forum cheerleading. Because we are headed into a major downturn any kind of remark about how urban areas relate to each other in relative terms is interpreted as an “It is different here” statement and immediately thrown out. This is kind of unfortunate as the places that bubbled the most are likely to fall the farthest, and the places that have long term stagnation trends are likely to have the slowest recoveries. It would be interesting to talk about that, but apparently we are only allowed to discuss the universality of the downturn here. It is sad that blogs always tend toward restricted discourse.
The market here in my humble estimation is trailing the rest of the country by about 4 months.Prices have not really moved lower but the volume of for sale housing is rapidly increasing and becoming very apparent.You can not travel any distance and not be surprised by the for sale signs.In the area where I live ther are 7 houses for sale in a 3 block area.One of which has had a sign up since April.
This past Sunday in the Philadelphia Inquirer I began to see blatently for the first time all sorts of consessions by builders and developers everything mentioned in this blog and more.What really surprised me though was the continuing advertisements for subprime loans particularily in some of the suppiosedly respectable builders like Toll Brothers.Another thing is there are several large developments such as the Navel Home(Toll Bros) in one of those areas right off center city that has an inordinate number of ads for rent which to me would indicate they were bought by flippers who have no intention of ever living in them.This is in direct competition with Toll Bros since the project is not complete.There are numerous condo projects underway that are not sold out,many of which have prices starting in the low $400.000,this is quite a stretch for the Philly area and I would anticipate this segment to slow to a crawl very rapidly.That’s what I see.
I also agree that the market is trailing. My “post your local market observations” have been pretty much the same each time…slightly more inventory, same old prices. I have recently seen some modest price reductions. I only watch the market closely in 4 Montgomery County school districts (since I’m only interested in buying in one of them ultimately).
Ditto for Balto…it’s not here yet, but I can see it coming…
I was born in South Philly, and lived in Center City after going to college there for 15 years. I owned a small home in Manayunk when I had my first child in 2003, then had to decide if the time was right to leave the city, or choose to stay. We left to the outer suburbs (Chester County) and I don’t regret it one bit (as I got a ridiculous amt of money for my tiny rowhouse), but I do love Philadelphia.
I think one of the best things, and most unusual things, about this city are the neighborhoods, South Philadelphia, Manayunk, Chestnut Hill, Roxborough, East Falls, the Northeast - these are working-class-plus-bohos like me, very warm and welcoming, and very livable.
They are also huge, with tons of existing housing, easy to get into CC from, cheaper to live in, and leave me scratching my head over why anyone would pay a million for a small condo in CC when they could have a nice house with a yard in Roxy and be a short drive/bus ride/train ride away.
Center City itself is bordered by Fairmount/Art Museum and Northern Liberties - just a lot of housing, very nice neighborhoods. Philadelphia, I think, has a lot more residential in the mix than other major cities.
So, I personally think that the city will be hit hard simply by oversupply of housing. We do have tons of colleges which helps with bringing in younger people, but they will likely have to leave after having children as the schools are pretty godawful.
The property taxes in Philadelphia are surprisingly reasonable when compared to the suburbs around the city, but that may be changing, I remember they were reassessing Manayunk when I left and it looked like our taxes were going up a lot. The new construction in the city all gets 10 year tax abatements, which was a huge enticement in getting people into those new condos. The builders, of course, priced the condos MUCH higher to make up for the lack of a property tax in the payment. There was a recent Inky article spelling out how they were making out like bandits.
And in (minus) ten years what happens? A lot of people will be really in a hurry to sell their condos then.
I also grew up in Philadelphia. I was raised in a very warm, working class neighborhood in West Philadelphia. Everyone knew everyone there and watched out for everyone’s children. I remember once doing something naughty as a child and by the time I got home, my parents already knew about it. There was always a sense that someone’s eyes were watching me. My husband and I are working abroad at the moment in a pretty upscale, expat area in Western Europe. People are so transient here that you hardly know your neighbors. As my children grow older, I sometimes wish they could have the experience that I had. It was wonderful. My family and neighbors were far from being rich, but they were hard-working, very religious, decent folks.
“In fact, he blamed ‘media hyperbole’ for promoting the idea of a so-called ‘bursting bubble.”
I actually think the media is not doing enough to promote the idea, but media aside, we simply reached a point where regular folk could no longer afford the product offered…
I’ve always wondered why the “media” didn’t do more to warn people about the dangers of a property bubble. Of course, they were watching their own little 1/4 acre pieces of crap zoom skywards and licking their financial lips. Obviously, the “media” doesn’t want property to drop. Most of the “media” own property. The ones at the top own multi-million dollar homes. The bulk in the middle own property which has doubled and tripled in some cases because most of the major “media” outlets are on the east and west coasts. If these characters shout, “fire!” too loudly……..they are burning their own fingers. Of course, it doesn’t matter if they report the truth or not. A bubble is a bubble is a bubble….and they ALL burst.
Classic spin formula:
Strong rebuttal of the criticism + positive, ambiguous, unprovable opinion = SPIN!
‘This doesn’t mean they are abandoning these projects,’ he said. ‘It just means they’re not going forward in this cycle.’
Philadelphia is no stranger to big, cyclic holes in the ground sticking around for decades.
I think the decades-old boondoggle “DisneyQuest” failed project hole in the ground is still there across from the Gallery . . . even *with* the bubble we had holes in the ground in Philly!
Jeez, from his own mouth (I guess it has two corners):
Help me here, there’s no bubble sez Levy since Center City can absorb “1,500 to 1,800 units a year”, but, at 2006’s pace “1,932 new units by Sept 1 and an additional 1,189 completed by year end”…
So that’s 3,121 new units, aka 1,321 to 1,621, aka damn near 100% more than the market can handle. And this is not a bubble?
‘So that’s 3,121 new units, aka 1,321 to 1,621, aka damn near 100% more than the market can handle. And this is not a bubble?’
Is that what the commentator meant by “The ‘equilibrium’ experienced in the market, where supply meets demand,”?
as a nation, weren’t we building 600,000 extra residences a year? had that work out mr. levy.
it’s amazing he actually proves there is a bubble while he’s trying to prove that there isn’t a bubble.
Philadelphia area is a great place to live. Every convenience of NY without the hassle and expense. The thing to remember about Philly is that because it never really booms (ala Tucson) the busts are not expected to be so big (hopefully). Homes in my affluent suburb with top school district that are priced right continue to sell. My neighbors’ four-bedroom colonial (under 3,000 sq ft) just sold for $650,000. She listed in in March for $800,000 (we all knew it was too high). If she had started at $699,000 in March it would have sold ASAP for that price. Since the spring we’ve had four homes sold (all with at least four bedrooms) with prices ranging from $915,000 to $599,000. Homes priced over $1,000,000 are definitely sitting longer. However, McMansions are still being built.
What suburb are you in? I’m in the Hatboro/Horsham area. I think we’ve seen a boom. Houses have at least doubled in value in the past 5, 6 years. I am hoping for a respectable bust, personally. But I’m not a homeowner (and would like to be) so of course I hope for that. If we could get fundamentals back down to 2000, 2001 I’d be happy. Is that a big bust? Well, to those who bought last year or so - yes. To those who’ve lived in the area for many, many years - no.
I cannot specifically comment on downtown Philly’s real estate market as I don’t really pay attention to it. But my overall opinion is, as everywhere else, too much building - too many condos - too overpriced.
I’m in a Main Line suburb where there wasn’t so much land to build big tracts of new homes during the last five years. Most of our building now involves tear downs. The biggest problem with the tear downs is that they’re being replaced by $1.5 million + McMansions and I’m not sure who’s buying those. Housing stock is diverse, everything from condos to 50s style split colonials to huge new homes.
The Main Line is, if I recall correctly, the top of the heap in Philadelphia. Didn’t Grace Kelly come from there?
Verrrrrry wealthy. Not typical of Philly as a whole.
Grace Kelly wasn’t born on the Main Line, but in the Northwest part of the city…completely different area.
she came from East Falls, but she did play a Main Line socialite in High Society, which is a remake of The Philadelphia Story
But then she played a princess for real in Monaco…looks like she really topped herself
Yes, East Falls is the Northwest part of the city…along with Roxborough, Manayunk, and Germantown. The Main Line is actually not in Philadelphia, but a surburb of Philadelphia.
Philly is a dump, I lived there for 2 years . I cant imagine people buying Real Estate in one of the most overpriced states in America.
That was my thought when I saw the subject header. Philadelphia. Who cares? I doubt anyone lives there voluntarily.
Hey, now, it’s not exactly hell on earth. See my rundown above.
I have to defend my hometown. There are far worse places to be. I was there last summer and enjoyed the Live 8 concert as well as the Elton John concert on the 4th of July. I’ve been many places via the military and my current work, but Philadelphia will always be dear in my heart. I have close family members there now also and they are the salt of the earth.
Don’t forget the FANTASTIC CITY WAGE TAX!!! Man, what a great innovation.
If you think Philly hasn’t boomed, you need to check:
http://www.ofheo.gov/media/pdf/hpi_msa06q2.txt
Price index Q2 1999 = 110
Price index Q2 2006 = 220
That’s a doubling of price in 7 years. Yes, the bubble is in Philly too.
If it would have sold for 700k in March,and it sold in Septeber for 650k, that’s almost a 10% drop in 7 months. Sounds like it’s busting!
The fact that Suzy used the expression “priced right” indicates that she is a realtor or in the real estate business in some way. No one else would use the expression “priced right”. It’s RE jargon.
Should I be “flattered” you think I’m a RE agent? Primarily a housewife who’s lived in the area for 20 years (although we’ve bought, sold and still hold commercial real estate). The real test of how our neighborhood is holding up is another similar house that just went on the market for $675,000. I’m interested to see how fast it sells (or not).
Philly is a dump. End of story. Comparing it to NY is laughable. The crime, the dirt, etc., it is a dying city if I’ve ever seen one. People have been fleeing for years. The coming bust will only worsen this trend.
Philly is a hole. People are angry and pissed off there for a reason.
Am I the only person who lived in Philly and commuted to South Jersey? Driving thru Camden at 8am is a revelation. But I did it only for a month and a half.
I was always told never to stop at red lights or stop signs in Camden at night. So I never did. Scary, scary city.
no bubble, just strong growth - and aggressive. more future section 8 housing for the crackheads.
imagine, future section 8 housing with granite countertops.
bet philly has a big UPTURN in arson this winter, like most bubble cities
Philly has a history of fires . . .
“1985 bombing in Philadelphia still unsettled
By Martha T. Moore, USA TODAY
PHILADELPHIA — The last block of Osage Avenue is a half-abandoned and lonely place. Most of the houses on the narrow street are boarded up”
The ongoing and spreading revival of Center City is real, and pre-dates the bubble. The same is true of several other Downtowns.
What I wonder is — did the bubble accelerate that revival, or will the bust kill it? Bubble pricing leads to more redevelopment, but tends to price out those who would really have a committment to the neighborhood. A bust might lead to a financial over-reaction that makes financing for reasonable projects hard to get.
‘This doesn’t mean they are abandoning these projects,’ he said. ‘It just means they’re not going forward in this cycle.’”
The patient isn’t dead, he’s just chosen not to breathe for a while.
“If he wasn’t nailed to the perch, he’d be pushing up the daisies!”
I have a cousin just outside of Philly that just purchased a 450K house. He still hasnt sold his 250K home(that he had a hard time paying for). I just found out his two brothers just purchased new homes also…One had a house that he knew he was upside down on, so he is going to rent it out.(needs 1700 a month). He just wants a bigger home…What is the matter with these people?.
They got a free public education?
Are they including complimentary firearms with those downtown Philly condos? I’ve been there, and believe me, you need protection. I live in the D.C. area and have been through the most crime-ridden parts of the city any number of times. Philly is far worse. Suburbs are nice, though.
I lived for many years in the city and never had a problem once. My car was broken into though when I lived for a while in the suburbs. Things can happen or not happen anywhere.
remember the bus tour of summer 05 ?
college kids bussin to phlydelphia to get some abandone rowhomes
wonder how those 20 somethings made out ?
Ok, as said before, I live in Monmouth County, work in NYC, and my gf utterly hates NYC but likes Philly and Boston, so several times a year we drive an hour west and go hang out in Philly for the weekend. Comparing Philly to NYC is ludicrous. Philly is DEFINTELY in the midst of a HUGE housing bubble, at least in many areas I have seen. I have seen homes in the scary section of Philly go from 50K to 200K and are now going straight down into the gutter again. There is a dearth of building going on last time I was there, and while definitely some places are occupied, there is HUGE vacancy in completed buildings and ALSO huge amounts of condos still for sale in them…. I can’t remember the name of one facility, but its near where most of the embassies are. It is advertising luxury condos (and in my opinion they actually look quite nice inside) for only 220K or so. They’ve been trying to pimp these things out for month’s now to no avail - and they’re still building more of them! When supply is eclipsing demand by orders of magnitude (I haven’t exactly heard of the vibrant amount of new business Philly is drawing), you have a bubble.
Wife’s aunt bought a $650K Toll Brothers McMansion outside of Philly last year. Complete with a plastic chandelier in the dining room and zero trees in the subdivision. The house at the entrance had a homemade sign hanging off the roof line that said “Toll Bros. are crooks”. She still bought there.
As a former suburbanite of Philly I want to defend it, well not really.
Yes, most of Philadelphia is a depressed working class ghetto
and
Yes, trying to place it in the same ballpark with NYC is laughable (’ain’t no ball park neither!’ pulp fiction line)
and
Yes, hardcore locals are pissed off and angry
and
Yes, one should pack serious ‘heat’ when walking about down there (been ‘held up’ there once, it was great!)
But, the downtown areas have improved over the last 20 years, and ‘the main line’ and chestnut hill areas are nice, and the suburbs of Montgomery and Bucks County are really nice. That’s it. All other sections of Philly are worth the flames of this website.
And yes, I moved the hell out of there as soon as I could… to NYC!
Jim’s steaks are better, Pat’s…Tony Luke’s are good, but they are real food, not enough grease!
You liked it enough to keep your username…
I disagree with having to pack heat when walking around. I used to work in west philly. Pretty much the only white girl on the subway past suburban station. The only crime I ever ran into was from homeless men. One time a homeless guy came up to me on the street and put his cigarette out on the arm of my jacket (I didn’t return to work for several days I was so shaken by it). The other time some crazy homeless guy came up in my face on the subway and just started screaming nonsense. Again, freaked me out. But other than that, I’ve never had any problems and - again - that was in west philly even.
As for the pissed off hardcore locals, give them ONE championship in a major league sport and I think they’ll lighten up.
I lived in Philadelphia (West Philly) for about 20 years and never had a problem. There are some very nice people there as well as not nice, but that is like everywhere else.
I also disagree with having to pack heat, but maybe because I’m a non-threatening looking female. When I worked in Philly in the late 80’s - mid 90’s, maybe the economy was worse, or I just left work later..used to catch the 8:05 or 9:05 R5. I was robbed twice but never at gunpoint (they got me in the revolving door jam scam both times..I’m a schmuck). Twice, coming down parking ramps, I “ran over” tacks and had to pay some (very nice, actually) bums who “just happened to be there”) 20 bucks to change my tire for me. So it really wasn’t that bad.
But now, I’d never work there without a drastic change in the city. No reason to do that commute, or live downtown with the traffic/parking nonsense.
Here’s a link to the fleeing population problem:
http://www.pbs.org/newshour/bb/entertainment/july-dec02/hwl_10-2.html
Granted, it is old, but the info is correct. The crash of prices in Philly will be hard, very hard. Only a moron flipper would beleive that Philly is some how gonna rebound any time soon. The prices are just plain ol’ speculation at its finest.