The Price is Right
How to buy and sell in the area's tough real estate climate
by Jennifer Pilling

When Joseph Busillo and his wife, Elisabeth, bought their Plymouth Meeting home in 2008, they thought they were making a sound investment. However, they were shocked to learn that their home’s value actually depreciated $20,000 in just two years. They have put the house on the market for a significantly lower listing price than they originally anticipated, and now wait and hope for a buyer to come along.

“Since putting the house on the market, it is clear that our area has been affected to a much larger extent than I was aware,” Joseph Busillo says. “There has been a significant decline in the value of the homes in my complex.”

The Busillos are not alone in their experience. Across the country, the real estate market has taken a virtual freefall over the past few years. Homeowners struggling to afford inflated mortgages, houses going into foreclosure, and limited aid have all been pointed at as being a main driver in the overall economic downfall.

Though it’s tempting to generalize, the real estate market climate varies greatly by region, and even by neighborhood. In comparison to the entire country, the Philadelphia area has generally fared well through the real estate market crash and recovery.

When comparing the current top-tier home value index in the Philadelphia area to that of the rest of the U.S., we find that this region has only dropped in value 1.9 percent, compared to the national average of 5.8 percent, according to real estate marketplace Web site,

Shawn Lowery, realtor with Keller Williams Real Estate in Montgomery County, explains, “Home value appreciation and depreciation rates vary greatly within a given region, with some communities in our area experiencing greater peak-to-trough spreads than others.”

Being a Smart Seller

Homeowners still looking to sell their properties at peak prices will likely need to come to terms with the reality of today’s market, and accept that they may lose significant equity, according to Lowery. “Many buyers of new construction leading up to 2007, especially those that purchased significant upgrades and options, have taken a hard hit,” he says. “Homes in jumbo loan territory ($417,000) and above have seen a glut in inventory.”

Pam Butera, a Keller Williams realtor with listings throughout the area, agrees that homes in the upper price range are suffering on the market.

“It’s not like it was a few years ago when we were in fantasyland getting unheard-of prices for homes,” she says. “Today’s seller needs to be motivated and priced right in order to get sold.”

The required 20-percent down payment and lack of second mortgage availability greatly hinder people’s ability to afford the high-priced homes they would like. “On a million-dollar home they’d need an excess of $230,000 to make the purchase,” Butera says. “With decreasing values, many homeowners no longer have that much equity to make a move up.”

Butera advises sellers to “be the best-dressed house on the market at the most competitive price.”

“I define this market to sellers by telling them we are entering a beauty contest and a pricing war,” she says. “The best advice for a seller in this current climate is to stage the home. Statistics prove that a staged home will sell for 17-percent more and in less time.”

Lowery also notes that if you need to sell your house fast, setting the right price is the most important factor. “Buyers, with the help of their real estate agents and a plethora of information now available online on market conditions, are knowledgeable consumers, and recognize when a home is priced properly,” he explains. “A fair price will move your house within a month or sooner. If your strategy is to up the price to allow for some bargaining room, your house will likely stall on the market.”

Busillo’s experience echoes Lowery’s advice of realizing that large profits are not generally viable, especially if selling a house after only a few years of owning.

“Assess your goals and whether or not staying in the house can be consistent with them,” Busillo advises. “If you need to sell the house to realize some other, overriding goal in your life then do it, but if you had expected to earn a large return on your house and haven’t, and you can stay in the house, stay there and reassess in a year.”

Buyers’ Market

In this environment, the current market favors the buyer, who has come to expect a good deal and often gets lucky when submitting below-market offers. With record-low interest rates and tax credits available on sales contracts signed by the end of this month, now is a great time to buy that first house—but don’t throw caution to the wind just yet.

As history has now taught us, buyers must be prepared to afford their mortgages, particularly in the accompanying tough job market.

Jim and Jessica Maher are taking their time looking for their first home on the Main Line. “It would probably be a good time to buy a home, given the current interest rates and tax credits,” Jessica Maher says. “However, it is a priority for us to save enough for a full 20-percent down payment first. This is so we have a monthly mortgage payment that we are comfortable with in the long term.”

According to Lowery, the strongest segment of the market continues to be the first-time homebuyer territory, or homes generally priced below $350,000.

“We have seen a strong uptick in buyer activity, especially first-time homebuyers and move-up buyers looking to take advantage of the $8,000 and $6,500 tax credits, respectively,” Lowery says.

However, the catch-22 of the situation could continue to stifle home value growth in the area, with no end in sight, Lowery says.

“Most of these homes sell for below market value, which in turn places a downward pressure on prices as a whole,” he explains. ”Until the pipeline of these distressed properties diminishes, home values may continue to decline, at varying rates, throughout our area.”

Jennifer Pilling is a freelance writer from Ardmore.