Real Estate Trends in UC -Condos Here Too?
One of the unmistakeable trends in the neighnorhood, as of late, has been the incredible rise of housing prices. There have been similar trends throughout the city and country generally due in part to low interest rates giving folks more "buying power" but it has been especially dramatic in UCity. The rise here, unlike other Philly neighborhoods where condo conversion and new construction has been in part the driving force of rising values, has been focused almost exclusively large Victorian twins that have reamined unconverted and are still single family homes. An interesting reflection of this trend is that while normally having a large house onverted into separate aprtments would be seen as an "improvement", raising the investment value of the property - here in UCity prices for twins divided into aprtments lagas well behind those for undivided twins.
Recently there has been announced the construction of some smaller new condo developments for the first time in decades in the neighborhood. Also some of the older large apartment buildings in the neighborhood have been converting some of their appartments to condos recently. Are condo's the "next big thing" in the neighborhood?
The UC Review recently published an extensive article quizzing virtually every realtor working in the neighborhood about just these topics. i quote the article below as a starting point for discussion.
http://www.philly1.com/story2030905.html
Quote:
A look at Real-Estate trends in Philadelphia
By David Block
Philadelphia: For Sale
The real-estate market in Center City Philadelphia and University City is fluctuating. Low interest rates, incentive programs to buy new homes in the city without paying real-estate tax for ten years have compelled a lot of people to move into these areas.
Kevin Gillen, a Wharton PHD student has researched real-estate trends for several years. Speaking not on behalf of Wharton but as an individual, Gillen discussed his research. "I have a data base with all home sales in the region going back to the 1970s. Every quarter I get the most recent set of sales, which I add to my data base. I estimate house price index using regression." Gillen said that regression in real-estate terms means statistically estimating the correlation between the changes in house prices, the house's location, its square footage, its square lot, and the quality of life in neighborhoods. "Lots of things affect house prices," said Gillen. "I'm trying to uncover the movements over time. The reason it's worth running a regression instead of just looking at trends and average prices is that there can be substantial selection bias in which homes turn over during a given period. For example, during the first half of the year only homes in North Philadelphia sold. In the second half only homes in Center City sold. If you compare the average prices to that, you conclude that house prices have gone up. On the other hand in reality house prices might have actually gone down. But you don't know that because of the sample selection bias."
Another incentive, which is bringing people to Philadelphia is the ten year abatement Tax. Gillen explained its origins: "Back in the 1990s in order to spur new development in the city and to get people to invest in homes, city council passed a ten year tax abatement property tax. If you create new property, build a new house, you don't pay any property tax on it for ten years after its completed. Similarly, if you make investments to an existing dwelling, whether it be converting apartments to condos or rehabbing your home, like adding a deck to it, you don't pay any property taxes on the additional improvement of value of your home. For more information on Gillen's research log onto Philadelphiataxreform.org.
Unlike gillen who has studied these trends Center City and University City realtors have experienced first hand changes in the market, rise in condos, the ten year Abatement Tax; and they observed that many of their clients who moved into Philadelphia and University City also work in those locations.
This writer spoke to over a dozen realtors on these subjects.
O'Donnell R.E.com
Chris O'Donnell, Vice President of O'Donnell R.E.com located at 45th and Baltimore has seen prices in houses rise. "There's a total of 122 condominiums in University City," said O'Donnell. "There's 116 at Garden Court 46th and Pine, and there are 6 others at 46th and Springfield."
In discussing home owners in University City who also work there, O'Donnell observed that home owners he has dealt with who also works in University City have high incomes and a high level of education. In regard to the 10-year Abatement Tax he like other realtors views it as a great way to spur development of all types in Philadelphia.
Solo Realty
Deborah Solo, one of the owners of Solo Realty, 27th and Chancellor, has seen Philadelphia develop a large number of condominiums. "Condo conversion seems to be a trend here in Center City," said Solo. "With the tax
abatement, builders now have an incentive to come into the city and build or substantially rehab existing buildings. That's influenced people to move here. We were not a condo city prior to the last few years. The real-estate market is strong. The condo trend: the legislation encouraged builder
developers to take unused commercial and industrial properties and have tax abatement. That caused it. There are new renters, new home owners, many of them who live in the city also work in the city, but we also see young people who live in the city commute out. A lot of young people have moved into Philadelphia for school or came back after school."
Common Ground R.E
"The Market has changed drastically over the past few years," said Lindsay Johnston, President of Common Ground R.E located at 3937 Chestnut St. "University City has been discovered, and not just by Philadelphians but by buyers. Everyone that's relocating to Philadelphia be that from the suburbs or from out of the city-out of the state- University City has turned into one of the hot spots in Philadelphia. Six or 7 years ago, University City was on most buyers second pier of choices. If they couldn't buy in Queen Village or in Old City, or Chestnut Hill, then maybe they'd look at the choices in University City. Now University City is on the first choice for many buyers." Johnston explained the positive change stemmed from the University City District and the University of Pennsylvania removing the stigma attached to the University City as being an unsafe place to live. Other stigmas such as not being family friendly and dirty also discouraged people from wanting to move there.
"The University did a lot of groundwork to help turn that perception around," said Johnston. "All too often perception becomes reality. The university did a great mortgage program with aggressive neighborhood restoration projects in the late '90s." He elaborated that housing stock in University City has always been tremendous. "They're large with yards architectural detail."
Home owners work in University City? "Many of the new home owners and renters work in the City. They are far from all being Penn employees. That's another way it's changed. There used to be on the average a lot more Penn employees as buyers. Even though, there are still a lot of Penn employees who are buyers, but there are a lot of other people jumping on the bandwagon as well. It's an expanded market."
Prudential Fox & Roach
Elizabeth Campion, a broker with Prudential Fox & Roach (her office is at the Rittenhouse Hotel) has seen huge shifts in the real-estate market some good and some bad. Some changes for the better: "We're attracting a more diverse clientele," said Campion. "In the past, we were an alternate suburb where people who couldn't afford Center City settled for University City or people who simply wanted to feel like they could park easily chose
University City over Center City for that reason. Now there's people who want to live in an urban environment and consider University City to be urban. We have the coffee houses being built, there's more night time activity than before. It's livelier. The bigger shift is the amount of money that people are willing to spend for the initial investment and then the amount of money they're willing to add to increase their investment to improve the property." Changes for the worst: "As prices rise, a lot of tenants have move out of the area. Families with more than one or 2 children aren't able to afford the neighborhood. The children of the people who live here now as they grow up, they will find it more difficult to buy into the neighborhood, there's a change in the population for some people that's a good thing, for others it's bad." She has seen a big rise in condos: "I think University City will trail Center City. The prices have doubled in the past 5 years. The condos are becoming more valuable.
Center City R.E.
Center City R.E. broker Ricki Hilldebrand has seen the prices in houses rise and observed the low interest rates. "There's a strong demand for houses in the Center City area," said Hilldabrand. "A lot of empty nesters, (baby boomers) are moving into the city, a lot of single house holds. There has been a big rise in condos." When asked if she thought that there was a large number of people who live in Center City also work there, she responded: "I think so. I live at 23rd and Locust and there's a lot of empty parking spots in the morning. After 5p.m. take your life in your hands getting a parking spot. It sometimes take forever to find a place to park." Her comments on the 10-year Tax Abatement: "It's a help, but it penalizes people who buy older homes."
Coldwell Banker Welker RE
Julie Welker, President of Coldwell Banker Welker Real-estate, 2311
Fairmount Ave. in Philadelphia. It continues to be very strong, has seen a strong market based on low interest rates. She attributed the condominium boom to supply & demand. "There's a demand for housing, but there's not a lot of vacant land left," said Welker, "so builders are taking existing buildings and turning them into condos. People are coming to Philadelphia after 9/11 and you have baby boomers who are now empty nesters coming into the city from the suburbs. When their families are gone, the empty nesters move to Philadelphia from the suburbs. Most of the people I worked with, they work in the city. I have some clients who are still working in New York, or in New Jersey, but for the most part, they work in Philadelphia."
Her comments on Tax abatement: "It's good for home owners because if they buy a newly constructed house their taxes are low for ten years. On the flip side, it's less money coming into the city."
Urban & Bye R.E
Urban & Bye R.E. broker Arthur Bye at 3520 Lancaster Ave has seen change in the market in University City for the past 5 years. "The market value is easily at an all time high from where it's ever been. In University City," said Bye, "there's only two places where there's condo development in University City. There is a need for more condominiums. When you buy a building and redo it as condominiums, that's high risk stuff. They're looking for high profits, but nothing has come up like that. Most large buildings in University City that would be suitable for condo conversion, Penn and Drexel, the bigger players, own. They are landlords collecting rent money for profit, not really interested in development. We have an influx of people who work in Center City who live in University City because Center City prices are higher. You can get twice the house in University City. The neighborhoods are similar, but they may be less convenient walking wise than in Center City. Similar buyers, faculty and staff, live in university city, Penn remains the 400 pound gorilla. They determine how the market goes in the area, but they also put backbone into the development of the community."
The Atacan Group
Like the other realtors interviewed, sales associate Ryan Hartman has seen the market change. His comments on the rise of condos: "Condos appeal to the people out of college, they're all staying in the city. Most of the people I sell homes to are between the ages of 20 and 30 who work in the city.
The Hayward Agency
Broker Paul Hayward and his sister Sales Associate Ann Hayward equated the real-estate market to a snowball gathering steam as it goes downhill. "Prices are skyrocketing," said Paul. "I'd say the cause is a spin off from the dot com bust and from people having bad experiences with the stock market. Knowing that real-estate always had gains in the past appreciation is always the feature of real-estate investment. On condos: I haven't noticed a huge rise in condos, downtown there are a bunch of projects underway in Center City, converting old ware houses and apartment buildings to condos. It's a life style change." Ann added: "Condos attract people who don't want to do a lot of physical labor. They don't want to maintain a lawn, they want to spend their leisure time in other ways. Homeowners work in the city, they want to be close to their job, where they live."
Alan Domb R.E.
Alan Domb, who defines himself as chief cook and bottle washer of his company, observed that from 1980 to 1996 the Real-estate market went up in total 10 to 15 percent. Then from 1997 to today it tripled. "The reason it tripled," the chief cook said, it had a lot do with catch up, low interest rates, development of Center City measures that were put in place by the Center City district such as the Vine Street Expressway Expansion. There's been an improvement in the quality of life." Domb has not seen a rise in condos. "There's a lot of talk about building condos, but no action. How many shovels are in the ground starting a project?"
Kathy Conway, Prudential Fox and Roach
Broker Kathy Conway has seen the real-estate market change Ôlike gangbusters.' "One big change is due to the 10-year Tax Abatement plan," said Conway. "A lot of the people want the new stuff, the lower rates, all the renters are turning into home buyers because of the low rates. That market is healthy. The plan is positive for the City of Philadelphia. The downside, it affects me selling old houses. Those houses don't have abatement. People will choose the houses with the abatement."
In discussing the rise in condos, Conway defines it as an understatement. "I wonder where are these people coming from. The more I say it, the more they come. It's driven by the baby boomers who have expensive houses in the suburbs who now want easy living. They don't want to commute they're done with the highway, they're done paying for their children's college tuition, it's culturally wonderful and rich to be in Philadelphia. And as a result, they don't want traditional houses. They're calling for the nice new one-floor condominiums. They're done with their gardens, their mowing. Because many of them still work in the city, that's one of the leading factors as to why they're moving into the city. The abatement hasn't affected my business. There are still buyers who want the old historical home. It's charming, unfortunately their taxes are a little higher because those homes are not abated. It hurt the market a little bit. We're not sure that tax abatement is going to stay for ten years. Supposedly, we are hoping the abatement doesn't change."
Campus Apartments
Campus Apartments CEO David Adelman credits more residents moving into University City to the development of the Penn Elementary school several years ago. "That brought a lot of families into University City," said Adelman.
He said that the idea of condo conversion in University City is being considered. For the most part, his clientele are Penn undergraduate and graduate students professors and Penn employees.
The Ten-Year Tax Abatement Plan: "It's a great thing for Philadelphia because it expands growth and helps cover the cost of development."
Mike McCann of Prudential Fox & Roach
Associate broker Mike McCann has seen a lot of people who lived in Center City move to University City. "The value of the homes have a lot to do with it," said McCann. "A style of the homes offer so much more value than in Center City. University City has the Victorian Twins, the nice yards, the square footage. You can spend 300,000 or 400,000 in center city and get a one bed room condo, but in University City you can spend that same amount of money and get a 4 or 5 bedroom Victorian Twin, with a porch and a lawn.
You have wider streets, it's cleaner, better parking, good transportation, resurgence of property getting renovate people are buying them the apartments and converting them to single houses. In University City, there's not as many condos in the market place, mostly twin houses."
Coldwell Banker Realty Corp.
Realtor Belynda Stewart has seen a glut of condos and she tries to steer many of her clients away from them. Stewart says: "A lot of first time home buyers are coming out of apartments so the move to condos is a natural progression. They want minimum upkeep they're used to living in apartments now they can buy because interest rates are low. There's many kinds of creative financing. I tend to steer clients away from condominiums because there's such a glut of them. Like most things that run in cycles, they're over built many of them are not well constructed management is poor. I've seen so many problems that unless the client exists. There are condos that are acceptable, but there are so many new ones that I advise my clients against them. I don't think they're getting value for the money they put out. They have the monthly fees, there's no tax advantage there. Some of the condos are poorly constructed, poorly managed. For some clients condos are appropriate and they work, for the most part I don't think condos are a good idea."
Maxwell Realty
Nancy Alperin, President of Maxwell Realty sees the real-estate market in Philadelphia picking up momentum. "It's describable," said Alperin. "They're more buyers who want to own property and the residents view it as an investment. They're not just buying a condominium, they're buying an investment property. When you purchase a condo, it's not just a home. It's an opportunity to purchase something and create your investment portfolio."
Like other realtors, she has seen warehouse buildings, office buildings converted into condos because of the real-estate tax abatement. Her opinion of the tax abatement: "For Philadelphia it's the best thing since the invention of sliced bread. It gives you the ability to have your taxes based upon the land value not the improved value for ten years. The ability not to spend so much on real-estate taxes, but spend it on your home. Your monthly payment isn't going toward paying taxes. Many homeowners she deals with work in the city."
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03-11-2005, 04:45 PM
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