What housing shortage? In Philly suburbs, homes are available - just not the kind buyers want

In walkable suburban towns such as Wayne, West Chester, or Kennett Square, the local housing markets can be just as competitive as large cities like Philadelphia, real estate agents say.

"As soon as [homes] hit the market there, whether they need work or not, they get snatched up," said Tammy Duering, the broker and owner of Re/Max Excellence in Kennett Square. "Clients want to be where they can walk to everything — to have the feel of living in Philadelphia but while still being in the suburbs."

But travel outside these city-esque towns, and home shoppers will find few bidding wars, Realtors say. For many homes on the suburban market, packed open houses are infrequent and desperate buyers scarce.

The availability of homes in Philadelphia's suburbs bucks a national trend. From Seattle to Sacramento, and from Philadelphia to New York, real estate markets across the country are facing housing shortages. Driven in part by sluggish new construction and little housing turnover, buyers who have entered the market in the last few years have encountered fewer choices — and increased competition for the houses that are for sale. As a result, prices in these markets have pushed beyond their pre-recession peaks, and sellers have the upper hand. Buyers who cannot find a home have been forced to wait for the market to turn.

So with that low-inventory narrative defining the national real estate market, it may seem surprising to hear local Realtors say that the suburbs have no housing shortage. But their observations are more than guesswork. According to an analysis by Drexel University economist Kevin Gillen based on data from Houwzer Inc., Philadelphia's suburban counties in Pennsylvania and New Jersey have either a "healthy" supply of homes on the market — or an overabundance.

In a perfect world, a healthy housing market is defined as having five to seven months' supply of inventory, meaning it would take that long for all houses in a market to sell if they did so at a constant rate. Philadelphia, a market that has struggled with low inventory, had a 3.1-month supply of homes in the third quarter of 2017.

By contrast, the seven counties that surround Philadelphia — Bucks, Chester, Delaware, and Montgomery Counties in Pennsylvania, and Burlington, Camden, and Gloucester Counties in New Jersey — had an inventory supply ranging from 6.5 months (Montgomery County) to 9.1 months (Gloucester County) in the third quarter. What that means: The suburban housing market is more balanced. And in some places, the advantage even belongs to the buyers.

"The numbers indicate … that suburban sales are low," Gillen said. "The number of listings in the more populous suburban counties is comparable to Philly's, but Philly's sales volume is way higher."

The reason for such dampened sales varies by location, according to local Realtors. But across all counties one theme holds true, they say: Inventory is available. Yet a lot of it is not the kind that many buyers want. Many listings, they say, are too dated, lacking modern features such as open floor plans and newer appliances. The homes would require renovations. Other listings, agents say, face the problems, stigma, and red-tape surrounding bank-owned or short sale properties.

"It's very nichey" in the Pennsylvania suburbs, said Susan Manners, a Berkshire Hathaway HomeServices Fox & Roach Realtor in Chadds Ford. "It really has to do with the price range … and the condition of the homes."

"Once you get above $650,000 or so, when you get into more of those upper-end houses, those are hard to sell," Manners continued. "… And some of the new millennial buyers just expect the houses to not have any issues, for the re-sale houses to be perfect."

Indeed, many of the markets that seem to perform well in Pennsylvania are ones with urban characteristics or strong school districts. Even a home not in tiptop shape located in a desirable township will likely sell, real estate agents say. Homes lacking strong township amenities, in contrast, will be a tough sell.

In New Jersey, agents say, the landscape is slightly different.

"We do have more inventory than Philadelphia," said Patricia Rohan, a broker at Weichert Realtors in Burlington County. "But the number of short sales on the market is probably throwing the number off. They sit longer on the market than regular homes that are not distressed."

Because the recession hit New Jersey homeowners particularly hard, the Garden State faces an abundance of short sale homes — homes that sell for less than the amount that the current owner owes on their mortgage.

"The short sales need permission from the bank to sell," Rohan said, so there is more "red tape." As a result, she said, some buyers will stay away — meaning the houses will linger.

"A lot of inventory that is out there is not desirable inventory," said Genevieve Haldeman, a Realtor at Berkshire Hathaway HomeServices Fox & Roach in Burlington County. "What buyers are looking for" is just not there.