Information Below about the status of the local real estate market in the Greater Philadelphia area including BUCKS and MONTGOMERY COUNTIES and economy and why it makes so much sense to BUY NOW or SELL NOW as of Summer, 2008
 

These are simple answers for difficult decisions and
opinions differ from person to person. Let me share
how I’ve come to my conclusions.
Why Our Current Real Estate Market is
Good for Buyers and Sellers
The National Economy
As consumers, we are apprehensive about our national
economy. However, most economists believe that any
downturn we may experience will be mild and
short-lived. The Federal Reserve Bank has proactively
addressed both the Credit Crunch and concerns about
recession by reducing the federal-funds rate and adding
liquidity to the market. Congress has also responded to
the threat by passing an economic stimulus package.
Rising costs of fuel and food are increasing our
concerns about inflation but their effect is unlikely
to pass through to the rest of the economy.
Our Local Economy
Our local economy is stable and continues to grow. It has
a diverse economic base and job growth is expected to
continue.1 Demographics, including baby boomers, echo
boomers and immigration, are also expected to significantly
contribute to the health of our local economy.
The Mortgage Market
August 2007 marked the end of a three year credit
free-for-all and signaled the beginning of the Credit
Crunch. Buyers had qualified for mortgages with low
initial rates regardless of their credit scores and often
without asset and income verification. Wall Street
bankers unfamiliar with the inherent risks of mortgage
lending packaged these loans and sold them to investors.
When the number of delinquencies increased, many
investors became concerned about the value of these
mortgages and demanded to be made whole. This chain
of events caused numerous mortgage companies and
A Message from Lawrence F. Flick, IV
Chairman and Chief Executive Officer
Prudential Fox & Roach, REALTORS®
1
The Chairman’s Report
SUMMER 2008
Buy Now? Sell Now? Wait?
What should you do?
• If you like shopping when there’s lots of selection and prices are good, buy now.
• If you are financially secure and plan to move to a more expensive home
in the future, then sell and buy now.
• If you are renting and would like to own a home, buy now.
• If your personal life circumstances dictate a move, sell or buy now.
banks to sustain great losses and therefore tighten their
standards for future loans. In doing so, they
eliminated many of the products that had contributed
to this problem.
Despite this necessary corrective action, it is important
to know that many financing options are available
today for buyers with reasonable credit scores. FHA
mortgages have made a remarkable comeback because
they require little down payment and recent changes
have made products more appealing to sellers. And
while interest rates may not be at historic lows, they are
still very attractive.
Our Local Real Estate Market
Real estate markets are like the weather. There is no
such thing as a national forecast. The national media
may dwell on reported 14% price declines2 but our
local market is performing better than those in many
other parts of the country.
Here’s the bad news: The number of houses sold has
dropped for two years in a row. The number of homes
for sale has grown and time on market has increased.3
Here’s the good news: Prices aren’t taking a dive. In
fact, they rose slightly the first quarter of 2008 over
2007.4 Within our local market, there are pockets
where prices have gone down a little, areas where
prices have held steady, and others that continue to
appreciate. The nationally recognized Private Mortgage
Insurance Company (PMI) recently reduced its risk
rating for our area to a mere 1.4% chance of a price
decline.5 Even if a home had a slight decrease in value
this year, long-term home ownership has proven to be
an exceptional investment.
Our market is more stable than many because vacant
homes are not an issue here. In states with the worst
price declines, like Florida, California, Michigan and
Nevada, the problem of vacant housing has resulted
from overbuilding and foreclosures. Fortunately, the
converse is true here. Foreclosures in our market have
decreased6, and the lack of land for development
prevents a critical oversupply of new construction.
Another issue that works in our favor is affordability.
Our diverse local economy and real estate market
protect us from irregular high to low price swings.
“Philadelphia has become a place of choice in this
(Bos-Wash) mega-region and the United States as a
whole. Housing everywhere, from the urban core to its
terrific suburbs, remains affordable…this advantage is a
huge edge for the region’s future.”7
WhenWillWe Hit the Bottom of the Market?
Most economists believe that we are bumping along the
bottom of the downturn and I agree. Housing starts
have reached a level equal to the bottom of the last
three housing downturns.8
But if an upward swing isn’t expected until 2009, why
would you want to buy or sell now?
2
Inflation’s Effect on Interest Rates
There is currently wide-spread debate about the future
of both short and long-term interest rates. Those who
believe it necessary to hold the federal-fund rate steady
in order to encourage continued economic growth are
at odds with those who think rates will need to rise
to curb the inflationary impact of rising oil and
commodity prices. One thing is certain: as the
economy and real estate market improve, interest
rates will rise.
The Economy and Real Estate MarketWill Recover
The bottom of the market is only known after it has
passed. While many people are “waiting out the
market,” a pent up demand is forming. By the time a
general feeling of recovery permeates our society, those
who waited for the bottom will have waited too long.
Home buyers will have more competition in the
marketplace. Housing prices will begin to rise. Interest
rates will begin to rise. There will be less inventory and
fewer, more expensive choices.
If you ask people why they own a home, the financial
investment is not usually the first thing they think
about. Rather, they focus on other significant reasons
for owning a home—security, meeting their families’
needs, living a desired lifestyle, and being a part of a
larger community.
Take the following quiz, and see if any of these
situations applies to you:
3
Q: You bought your house in 2000 for $195,000. You put
20% down and had closing costs of $24,000. In 2005,
your neighbor sells a similar house for $325,000. Now in
2008, when you wish to sell, your Realtor suggests a list
price of $300,000. Your closing costs to sell would be
$21,000. Did you lose $25,000 on your house? Or did you
realize a $72,000 net gain after paying closing costs for the
purchase and sale?
A: Just because your neighbor sold for a higher price
does not mean that you lost money on yours. The
$72,000 you realized from your initial $51,000
investment was a 41% gain.
Q: You looked at a house a year ago that was priced at
$220,000. Interest rates were 5.50%. You decided to wait
a year to see if prices would go down. Now you’ve found a
similar house that is priced for $198,000 but interest rates
are now 6.50%. Did you make the right decision to wait
out the market?
A. If you had purchased the home a year ago, your
monthly payment would have been $1,254.25 per
month. Now, with the increase in interest rates, your
monthly payment will be $1,251.49. Even though you
will pay $22,000 less, you will still pay the same
amount of money each month, and you spent a year
living in a place that didn’t meet your needs.
Q: You are financially secure and live in a house you like
but know that some day you want to move to a larger,
more expensive property. Five years ago, you paid $175,000
for the house you are in now. It was worth as much as
$200,000 in 2005, but prices have declined 5% from that
peak and you can sell it now for $190,000. You see a house
you like that is priced at $400,000. It would have sold for
$420,000 two years ago, but it is temporarily worth less
during this market. Should you wait to sell and buy?
A: You should sell and buy now. Whether you decide to
move now or later, you will pay closing costs on both
transactions. You will sell your current home for
$10,000 less than at the peak of the market but you
will save twice as much — $20,000 — on the
purchase of your new home.
4 An Independently Owned and Operated Member of the Prudential Real Estate Affiliates, Inc.
Now Is the Time
I’ve given you my thoughts on the market and why I
believe now is a good time to buy or sell a house. If you
want to make a move now or in the future, the decision
to act now rather than wait makes good economic and
practical sense. If you have any questions, or want to
learn more, your Prudential Fox & Roach sales
associate or Trident mortgage consultant will be happy
to assist you.
Sincerely yours,
Lawrence F. Flick, IV
Chairman and Chief Executive Officer
Prudential Fox & Roach, Realtors®
Sources:
1. Precis Metro, Philadelphia. Moody’s Economy.com, May 2008.
2. Standard and Poor’s Case-Shiller Housing Price Index Press Release, May 27,
2008.
3. Trend Multiple Listing Service. Area includes Northern Delaware, Central and
Southern New Jersey, and Southeastern Pennsylvania.
4. Office of Federal Housing Enterprise Oversight (OFHEO) News Release, May
22, 2008. Philadelphia MSA includes Southeastern PA, Northern Delaware,
Southern New Jersey. Price increase for Philadelphia MSA reported as 1.51%
1st quarter 2008 over 1st quarter 2007.
5. PMI Mortgage Insurance Company. Economic and Real Estate Trends, Spring
2008.
6. Alan Heavens. Philadelphia Foreclosures Lower Than U.S. Rate. Philadelphia
Inquirer, April 29, 2008. Philadelphia area foreclosure rate decreased 30% in
the first quarter of 2008.
7. Richard Florida. Why Philadelphia’s Economic Future Looks So Bright.
Philadelphia Inquirer, March 30, 2008.
8. Moulle Berteau. The Housing Crisis Is Over. The Wall Street Journal, May 6,
2008. 

Which neighborhoods offer the best values? It's my job to help! Ask me any question, or request information about communities in Philadelphia, Montgomery County or Bucks County, PA. There's no obligation, and I promise to respond quickly...