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dogfaceboy · #30 (**permalink**) 03-24-2007, 09:43 PM

Quote:

Originally Posted by bjeebers

It seems people always like to point to places like Rittenhouse and Old City and say "Wow, who's buying all these expensive homes?!? The market must be ready to crash!" Well, cities have a limited size to their downtowns and thus a limited supply of homes, and there will always be enough rich people able to buy these fancy homes (now, willing to buy is another story depending on crime, etc).

The real worry is all these homes priced between $100,000 and $200,000 in Philly. Almost all of these homes on the market are small, crappy, old, outdated, or in totally sketchy neighborhoods--or all of the above. With interest, PMI, insurance, and principal included, the mortgages on these homes would be between $850-1500 a month! Now, just HOW MANY working class families out there can afford payments like that??? Exactly. The uber-inflated lower end of the market is totally going to crash since no buyers will be left who can afford this.

An example of crazy lower-end of market:

Fancy House in Ritt Sq in 2000: $450,000
FH in RS in 2007: $650,000 (a 45% increase)

Tiny Row Home in Scary Neighborhood in 2000: $55,000
TRH in SN in 2007: $145,000 (a 165% increase!)

This lower-end of the market is clearly the side that is out of control, and when it crashes, it's pulling the rest of the market with it.

I'd totally agree with your analysis, if Nutter wasn't going to be our next Mayor.

I say he will be and he'll implement a new tax incentive to promote buying in lower priced areas.

He outlined it in some detail but the crux of it is, he'll give a larger tax abatement{probably 15 years} for new construction and total rehabs to encourage growth in certain economicaly depressed areas.

He's also proposing to decrease the current 10 year that is offered as insentive to possibly 8 years, and that will be for certain areas that are higher priced homes.

I'm no economist by any stretch but on the surface I see his idea as solid and promoting growth, which as you mentioned is needed in the lower end of the middle class market.