30 NOVEMBER 2016

Is there another real estate meltdown in our future, this one owing to climate change?  The chief economist for Freddie Mac predicts there is.  His reasoning is roughly as follows:

People’s attitudes toward living near water in an era of inexorably rising sea levels are beginning to change—but not as fast as the growing risk merits.

For now it is mostly business as usual.  Developers continue to build in increasingly risky locations, selling their new construction and making their profit long before any depreciation can occur.  For now banks continue to make loans to buyers of such homes and make their commissions well before the loans are bundled into increasingly risky securities and sold to the unsuspecting.  For now the federal government continues to subsidize flood insurance rates, obscuring the true market cost of the risk of living in a coastal area in the 2lst century.    

While it’s difficult both to anticipate the exact timing of the end of the waterfront property bubble and to predict whether that end will be a sudden rupture or a slow deflation, one thing is clear to the Freddie Mac economist:  unlike 2008, there can be no expectation that the real estate assets in the affected areas will ever recover.  He can envision a day when conditions are sufficiently onerous for owners in deluged coastal areas that they simply abandon their homes and their mortgages along with them.  That alone could trigger another housing meltdown.  Perhaps even before then lenders will have started to shy away from making mortgages in specific water-prone localities and the federal government will have started to shift away from subsidizing flood insurance.  The number of people financially capable of buying near the water under such costly circumstances will necessarily decrease, probably significantly. 

The economist’s bottom line is this:  coastal home values will go underwater long before the properties themselves do. 

Link to The New York Times Article:



The status at mid-year of our region’s real estate market is “good!”  In my brokerage company’s large sales territory, real estate transactions in 2016’s first half increased 15% over 2015’s first half.  Overall, unit sales are up 71% from their lowest ebb in 2011.  There is not as much supply as there is demand, which is causing attractively priced homes in good condition to sell fast, often with multiple bids.

Appreciation rates in the city and the suburbs are widely divergent.  In Center City prices have exploded.  According to local analyst Kevin Gillen, city homes have recovered “all their lost value and moved into net positive territory.”  Suburban homes, by contrast, have only just begun catching up.   Gillen gives city homes a total average appreciation since early 2012 of 32.2%.  To suburban homes he gives 12.7%.  Although the Main Line real estate market, our market, may be undergoing a slow recovery with respect to home values specifically, at least home values are, in fact, very gradually recovering.  Combine that datum with our steadily expanding sales volume and current supply-demand dynamic and what one sees is a pretty darn good real estate market.


24 JUNE 2016

Those of us who follow local real estate trends have noticed a disparity between the market in Philadelphia and the market in its suburbs.  The city, awash with new construction, is enjoying today an unbelievable renaissance that is drawing national attention.  According to BHHS Fox & Roach, Realtors’s chairman and CEO, Larry Flick, home values downtown have thus, not surprisingly, increased an average of 3.9% in the first quarter of 2016 over the first quarter of 2015.  By contrast, over the same time period the average suburban home value decreased by 1.3%, Flick reports. 

In an email on urban versus suburban appreciation rates, Flick cites fascinating data compiled by Drexel University’s Kevin Gillen from our company’s proprietary Home Market Reports.  According to Kevin, “Since prices in both markets hit bottom in the first quarter of 2012, they have risen 23% in Philadelphia County compared to an average of 4% in the surrounding suburbs.  As a consequence, house prices in the city have completely erased their losses due to recession, with current house price levels in the city being 1% above their pre-recession peak in 2007.  By contrast, suburban prices need to rise another 21% before they can erase their losses.”  This is a snapshot, then, of where we are, roughly speaking, in greater Philadelphia’s recovery from the real estate bubble.  Part of greater Philadelphia, the city part, has recovered; the suburban part has a ways to go.

While prices have remained basically flat in the suburban market, there are variations within it in terms of supply and demand.  The low-end to middle price ranges are hot currently, creating a lively seller’s market wherein multiple offers frequently eventuate in listings going for over their asking prices.  At the higher price ranges, however, there is a glut of inventory.  Flick characterizes that part of the suburban market as “certainly better than it was three years ago” but still “soft, as upper-range buyers are more conservative and less aspirational in their housing needs.”  To his take on the health of Main Line luxury homes, I would merely note that it remains the case that when especially beautiful listings in coveted neighborhoods are priced right, they do sell instantly.


17 FEBRUARY 2016

Given the early spring market’s signs of vitality up and down the Main Line—especially for new listings in good condition that are priced correctly—I think I can safely predict we will locally, for the fourth year running, experience in the March through June months a competitive house-buying dynamic.  

The year 2015 saw a substantial uptick in home sales nationally, which at 5.26 million units is the highest level we’ve reached since 2006’s unhealthy high-water mark of 6.47 million units.  During the same time period (2015) inventory declined 10% over the previous year.  Although rising demand and dwindling supply should normally have boosted home values, Larry Flick, Chairman and CEO of BHHS Fox & Roach, Realtors, notes that this has not happened in our market area or any number of other locales.  For us and for them the median sales price has remained flat and home prices “have increased anywhere from a modest decline to +3%,” depending on specific properties’ location and price range.   

As for the upper end of the market, with the exception of Center City (a big exception!) it remains sluggish and Flick expects that sluggishness to persist.  

For any of you who may be potential home sellers this year or down the road, I recommend we have an informal meeting to discuss my formula for obtaining top dollar in the current market climate.  Selling need not be as stressful as homeowners imagine it will be, and with careful planning the outcome can prove very gratifying indeed.  Please allow me to show you how my magic works!

As for any of you who may be potential home buyers, now is an opportune time to get in the game—mortgage interest rates remain low and, as described above, home values continue to rise only modestly on the Main Line.  Moreover, springtime brings the greatest amount of new inventory onto the market.  Don’t be afraid of the inevitable bidding wars at this competitive time of year; I have a special technique that, for years now, has enabled my own buyer-clients to win them.