Housing slump spawns winners and losers

Pascale Phaeton is dipping her toes into the still-choppy sea of real estate.

Phaeton, 34, a legal assistant, sold her $90,000 West Virginia townhouse and moved to Glen Mills two years ago, hoping the schools here would be better for her autistic son, Julius, now 12.

He's thriving, so Phaeton, who has been living with her parents, has begun looking for a place of her own. "It's a good time, especially with interest rates so low," she said.

In the last few weeks, real estate agents say, prospective buyers such as Phaeton have begun to venture forth again. Traffic is greater than since the dawn of last fall's financial meltdown, agents say, and people are looking seriously - a positive development.

"It does seem that there is a little more confidence in the economy, and, therefore, there are more buyers out there," said Sandy Levenson, a Prudential Fox & Roach agent who has been selling houses in Cherry Hill for 31 years.

Drawing out the house shoppers is what Noah Ostroff, a Coldwell Banker Preferred agent in Philadelphia, called a "perfect storm" of low mortgage rates (4.94 percent for a 30-year fixed, 4.42 for a five-year adjustable), the $8,000 tax credit for qualified first-time buyers, and sellers now willing to negotiate on price.

The combination has made home ownership more affordable than at any time in the last 39 years, said Walt Molony of the National Association of Realtors.

Serious lookers pushed the region's pending sales - agreements that go to closing 45 to 90 days from signing - 19.5 percent higher in August than the same month in 2008. August's sales of previously owned homes dipped just 0.6 percent from August 2008, the smallest loss so far in 2009.

Many house hunters are focusing on $350,000-and-under listings in both the city and suburbs, partly because of income limits on the tax credit for first-time buyers.

Complicating matters for buyers in the $350,000- to-$700,000 price level looking to trade up are viselike rules on jumbo mortgage loans, those above $417,000.

Jumbo loans now have "fixed rates in the mid- to high 6 percent range, with very restrictive underwriting guidelines," said Fred Glick, a Philadelphia mortgage broker.

But this is also the price range "where you see the short sales and foreclosures," which account for a total 6 percent of the local market, said Art Herling, Long & Foster regional vice president.

People are shopping for these more expensive homes, too, and making offers.

In the last week, for example, Exton renter Alison Cook, 39, and her husband, Scott, 42, both physicians, beat out two other bidders for a $630,000 house in Berwyn that can hold them and their four children.

They need a jumbo loan, "and rates are 1 percent above fixed, so our mortgage guy is trying to work out a deal for us," Alison said.

Prospective buyers report that there are noticeably fewer sellers these days, but that they are more eager to negotiate.

Sellers "who price it competitively and have it in move-in/ready-to-show condition are going to get offers," said Pam Gabriel, a Weichert Realtors agent in Media. Buyers seem willing to add as much as $15,000 to their mortgages rather than spend money on fixer-uppers.

Caryn and Brandon Spector are looking for a new house, but they won't move until they sell the house in Cherry Hill they have lived in for six years. It's been on the market for two weeks.

Caryn, 34, a homemaker, and Brandon, 35, who works for his family's janitorial-supply business, are looking for $459,000 for their single. That's above the tax-credit threshold, but she thinks the fact that they have spent lots of money and time on their house will attract buyers who want only to settle and move in.

"That's what we're looking for," Caryn Spector said.

Since the real estate boom ended in this area in August 2007, prices have dropped comparatively little, only 12 percent, according to second-quarter 2009 figures from Kevin Gillen, Econsult Corp. vice president.

But buyers are more careful now, Gabriel said, "paying attention to their finances, saving money, and very aware of their [credit] score and how important it is in the process."

So careful, builder Marshal Granor said, that he has been dealing with buyers who aren't buying from him.

"One odd thing is people coming in pretending to be buyers, but we find out they already have a contract elsewhere," said Granor, a principal in Granor Price Homes of Horsham. "I guess they are just double-checking to make sure they got the very lowest price they could find."

Thus far, 370,000 sales nationally can be attributed to the $8,000 tax credit for qualified first-time buyers, which is retroactive to Jan. 1 and will end Nov. 30.

Yet not everyone out and about in the real estate market now wants the credit or is eligible for it.

First-timers Sameer and Gina Raval, who have been looking in the Cherry Hill-Marlton area for the last couple of months, "want to find something that's perfect," Sameer said, and won't rush into a purchase just for the tax credit.

The couple, both 28, rent in Philadelphia, where Gina Raval works in health care, but their apartment lease will be up soon.

Sameer Raval, who works in finance in Princeton, said they had been looking at single homes, but "much of what we are seeing is 40 years and older, and we don't want to do much work to move in." So they've shifted their search to condos and townhouses.

Two years of saving for a big down payment coincided with the tax credit for Jim Cooper, 27, who works in sales. A three-bedroom, one-bath house with a garage in Berwyn that cost in the low $300,000s will be his Oct. 15.

"The house had been on the market since March with a price significantly higher, so I waited," Cooper said. "A lot of houses still are overpriced, but even so, I get a sense that the market is coming back."

In Washington, there is growing debate over extending the tax credit past Nov. 30 and opening it up to all but investors and second-home buyers.

Yet Gillen is dubious about the tax credit's ability to create a sustainable recovery of the real estate market, even as his data show higher activity among first-time buyers.

"While the tax credit may be motivating them," he said, "what is working against this momentum is that rents are declining," a disincentive to switch from renting to owning.

Monthly rents in the region have averaged $1,361 this year, according to the search engine Rentals.com.

But there's more at work here, said Jeff Detwiler, Long & Foster chief operating officer.

"With values down and rates down also, affordability is higher today than it has been in at least 10 years," Detwiler said. "On an average, home buyers are saving $5,000 to 6,000 per year on financing costs and buying at a $25,000-$35,000 discount to prices two years ago."

For Pascale Phaeton, today's market is certainly more accommodating than the one she found here in 2007, when everything she looked at "was too pricey by comparison to West Virginia."

So she'll "look and do my homework." And stay in the hunt.