Philadelphia Real Estate & Philadelphia Homes for sale at Philly Living

Remember, real estate is a local business.  Market to market and even neighborhood to neighborhood can be different.  What is happening is that sellers are not able to simply tack on a healthy percentage increase on what a comparable home sold for the previous year as was the case the last few years here in Philadelphia.  Instead, they are taking a good look at the marketplace with their sales associate and determining what the proper price of their home should be.  I can’t emphasize enough how critical proper pricing is in this market.

Additionally, remember Econ101 - supply and demand.  If there is a healthy supply available, the consumer has the opportunity to shop around and choose the right home.  A healthy negotiation between buyer and seller then ensues.

While the media is focusing on dropping prices, it is important to remember that there is still appreciation going on.  And, in the historical context of how long you may have owned your home, appreciation has been substantial.  According to the Office of Federal Housing Enterprise Oversight over the last five years through June 30, 2006 existing homes in the U.S. have appreciated more than 56%.

Finally, we also need to be aware that not all of America had the white hot real estate market of the past few years.  For a lot of Americans, slow and steady appreciation was the norm.  These folks read about high appreciation, booming and falling markets, and scratch their heads because they’ve never had that in their market.

We are still hearing about the real estate bubble and no one seems to be able to answer the question of whether it has burst or not.  Here are a few things to consider:

1. First-time homebuyers (in particular) are naturally hoping that prices will come down.  They hear about this bubble and get a false sense of security that prices will automatically come down, so they remain on the sidelines.  I think that this type of “timing the market” is very bad.
2. There has never been a national real estate bubble since the National Association of Realtors began recording median home prices in 1968.  Freddie Mac has never shown a decline in national median prices since their record keeping began in the mid-50s.
3. In my terms, the definition of a real estate bubble is a massive oversupply of homes coupled with massive job losses.  We are just not seeing that.  In fact, the Brookings institute reported that the U.S. will need 40 million new residential housing units by 2030.
4. The Office of Federal Housing Enterprise Oversight studied 362 metro markets between 1978-2003 and found only 21 real estate busts which they described as a 15% decline in home prices over a 5-year period.  That means that only 2/10th of 1% of the markets studied over 25 years were busts and only 9 occurred after a real estate boom, which is described as 30% home price appreciation over a 3-year period.  Clearly, the idea that home prices go way up and then come crashing down is simply not true.
5. Except for catastrophic injury or illness, sustained loss of a job or other personal crisis, we will not sell our home at a loss.  A home is what we live in; it is not a stock or bond and cannot be bought or sold quickly.  A home purchase is a complex and emotional decision that is certainly not a routine event.

So what does this all mean?  It means that though some segments of the Philadelphia marketplace may see a bit of adjustment (see new construction condos for a good example), it is highly unlikely that we will see any substantial bursting of the bubble.

Selling a fixer-upper is not impossible, but buyers are going to expect it to be priced far less than comparable homes in good shape. Your strategy for selling a fixer-upper will vary depending on factors including the location, strength of the market and how much work is needed to get your home in shape.

Be Prepared - know what’s wrong with it
Many experts advise getting your own inspection before selling any home, and this is an especially good idea for a fixer-upper. That way, you avoid being surprised by problems that could sabotage a sale when the buyer gets his own home inspection. You have to disclose the faults in your fixer-upper, especially things like lead paint or plumbing problems, but at least the buyer will be confident that you’re not trying to hide problems that will be expensive to fix.  I always tell my clients to be wary of the disclosure statements that disclose nothing.

Spruce it up….maybe
Before you do anything, you need to decide whether you’re selling your fixer-upper as is, or if you’re willing to do some work that will more than pay for itself on the sale. Real estate experts say even cosmetic improvements like refinished hardwood floors or fresh, neutral paint can make a big difference when selling a fixer-upper.

You can get more people to look at your house — and thus increase your chances of selling your fixer-upper — with the minor remodeling of a key area, like the kitchen, or by replacing unsightly siding. According to a 2004 survey by Remodeling magazine, you would recoup an average of 93 percent of the remodeling costs, and even more in some markets.

So, why would you invest money if you’ll only recoup 93% of it?  It’s all about salability.  Remember that, from the buyer’s perspective, if they buy a completely remodeled house, they can buy the whole thing with mortgaged money.  However, if they have to put $50,000 into making a fixer-upper shine like a new house, that’s $50,000 out of pocket.  By appealing to the masses who can’t afford to outlay rehab money, you are widening the pool of perspective buyers and will significantly increase your odds of selling.