If the massive cluster of new housing, shops, and restaurants rising in King of Prussia is any indication, the suburbs are as prosperous as ever. There, as elsewhere across the Philadelphia region, developers have poured millions into new developments and town squares, betting on the prospect that Philadelphia itself can't stay attractive — or affordable — forever.
It makes sense: Since 2010, every suburban county in the region except for Camden County has seen its population grow. Communities such as Ardmore and Media have enjoyed new success after rethinking their downtowns. And corporations have been ditching the city for the suburbs, heading to municipalities they say can offer lower taxes.
There's just one flaw in this picture: Nearly 10 years after the housing bubble burst, the median home-sale price in the Philadelphia suburbs is down 11 percent, having dropped $27,000, from $242,950 in the first quarter of 2007 to $216,000 in 2017. And few signs exist that the suburbs will regain their pre-housing-bust vigor quickly.
It's posing a problem for some suburban homeowners — many of whom are holding on to their homes longer, for fear they may not be able to sell for a high enough price. And it's causing ripple effects across the market, resulting in fewer properties for sale and bidding wars for those that are, and a growing challenge for first-time buyers and the middle class to find houses they can afford.
"Suburban homeowners … cannot obtain a sufficiently high price that allows them to also pay off their remaining mortgage balance," said economist Kevin Gillen of Drexel University's Lindy Institute for Urban Innovation, who releases a quarterly analysis of regional home values based on sale-price data for single-family homes from the city's Recorder of Deeds Office and Trend Multiple Listing Service. (The analysis does not include condo sales.)
The slump also presents a sharp contrast to Philadelphia, which in first-quarter 2017 saw home values surge 11.8 percent compared with a year ago, according to Gillen's analysis for his Home Price Index, which evaluates the region's entire housing stock, regardless of whether homes were purchased during a particular period.
By contrast, suburban values dropped 0.5 percent as a whole in first-quarter 2017, according to Gillen's analysis of homes in Bucks, Chester, Delaware, and Montgomery Counties in Pennsylvania and Burlington, Camden, and Gloucester Counties in New Jersey.
Yet the losses in the suburbs have been exacerbated over time, Gillen found: Since the first quarter of 2007, when the housing boom peaked in the suburbs, every county in the region has seen its overall home values fall — some of them drastically. And even with property values appreciating at a rate of 2.4 percent a year, a typical suburban home is still valued 19.1 percent lower than it was at peak of the housing boom in 2007.
Philadelphia homes, meanwhile, have appreciated in value at a rate of nearly 12 percent a year, boosting them to a level that is 15.6 percent higher than it was during the same 10-year period, Gillen's analysis showed.
Such a drastic difference between the suburbs and the city underscores just how unequal the comeback from the Great Recession has been both here and and across the United States, dividing largely along class lines and urban boundaries. From Philadelphia to California to the South, observers' analyses show, city home values generally have outpaced the suburbs', even as specific suburban communities — mostly the higher-income ones — have enjoyed big gains.
"Urban home values have had a stronger recovery than suburban home values nationwide," said Aaron Terrazas, a senior economist at the real estate company Zillow. "There has been a preference shift to be close to both jobs and amenities, and that's associated with urban living."
Realtors, economists, and other observers say the urban draw is only part of the story. Certainly, additional factors have been demand for nearby amenities, and the number of wealthier and college-educated individuals who have been flooding into Philadelphia and many other U.S. cities, said Jessie Handbury, assistant professor of real estate at the Wharton School of the University of Pennsylvania, who studies urban revival. The phenomenon has trickled past Center City into such sections as Brewerytown and South Philadelphia, Gillen's analysis showed, with many areas seeing skyrocketing home values — likely the result of increased development and demand in gentrifying neighborhoods.
"They want to be close to bars and restaurants and gyms, exercise places, and nail-salon establishments," Handbury said. In turn, "there's an increase in [urban] demand among these groups — you have people who want to spend money on housing downtown. And you see prices respond to that."
An Inquirer analysis of Gillen's zip code-level sale-price data from 2007 to 2017 shows that, in general, the unevenness of the housing recovery in the suburbs reflects a growing divide between high- and low-income Americans. Overall, towns on the Main Line have seen the largest growth in median sale price compared with 10 years ago, the analysis revealed. Meanwhile, nearly all of South Jersey and lower- and middle-income communities in the Pennsylvania suburbs have seen median sale prices drop. (Median is the middle number: Half the houses sold for more, half for less.)
Behind those losses is a complex mix of economic and behavioral forces, all of which reinforce the age-old real estate adage: location, location, location. Highly desirable communities — with good school districts or trendy downtowns — have fared well as sustained or even increased demand provided big gains on top of prices that already were high.
In Pennsylvania, four of the five zip codes that experienced the largest gains in median price between 2007 and 2017 — Narberth (19072), Haverford (19041), Malvern (19355), and Devon (19333) — had first-quarter median prices this year that were higher than $480,000. At the other end of the spectrum, the five zip codes in both New Jersey and Pennsylvania that saw the largest price drops all had median prices of $108,000 or less in the first quarter. (Zip codes with fewer than 10 sales in both first-quarter 2007 and 2017 were excluded.)
Lower- and middle-priced communities have fallen that far, observers say, because they fared the worst nationwide when the real estate bubble burst. During the boom years, many lower-priced homes appreciated faster than higher-priced ones, partially because of lenders who gave loans to unqualified buyers, increasing demand and prices for lower-cost properties. When the market tanked, those inflated values tumbled the hardest. Many could not afford to stay in their homes, ushering in an era of rampant foreclosures that dragged down prices even further.
The aftermath of the foreclosure crisis can be seen today in South Jersey and parts of Delaware County. In addition, many homeowners are still underwater there: They owe more money on their mortgages than their properties are worth.
According to Attom Data Solutions, which tracks deed, mortgage, and foreclosure data nationwide, Willingboro in Burlington County and Darby and Upper Darby in Delaware County led the region with the greatest percentage of homes underwater in the first quarter of 2017: each with more than 37 percent. By contrast, King of Prussia in Montgomery County and Haddonfield in Camden County had fewer than 4 percent of their homes underwater.
"The market is recovering very slowly here in our area," said Joanna Papadaniil, an agent with Berkshire Hathaway HomeServices Fox & Roach in Mullica Hill, Gloucester County. "We're trying to recover from the crash, and we can't because our values came to be so high in that bubble 15 years too soon."
"We have people underwater on their mortgages. A lot of buyers see this," Papandaiil said. "Underpriced homes are the ones that are going to sell. … And what used to be the $600,000 product is now the $500,000 product. And the buyers who can afford that are going to be more discerning, looking at school districts, looking at commute, looking at downtowns, rather than just the size or the type of home these days."
Figuring out what is happening to middle-class homeowners — many of whom weren't in foreclosure, but who also haven't seen gains — is harder to do. Though some places — for example, the Marcus Hook-Boothwyn area in Delaware County and Horsham in Montgomery County — saw big gains in the last 10 years; others, such as Phoenixville, Chester County, and Bensalem, Bucks County, experienced losses.
The reality, many say, is that some of these homeowners are just stuck. Wages still aren't rising the way economists expect them to, and many middle-class homeowners are paying off mortgages on properties they bought when prices were inflated.
"When you're underwater, you're trapped — it's like an anchor," said Mechele Dickerson, a professor at the University of Texas at Austin School of Law who is an expert in consumer debt. "One of the problems you run into with middle-class homes tumbling in value is that when the housing prices fall, so does household wealth."
What's happening in the Philadelphia region is quite the reversal from a decade ago, when the suburbs, not the city, boasted the most robust housing growth. Yet Philadelphia's situation mirrors a trend across the nation, Zillow economist Terrazas said.
According to a Zillow report released last year, urban home values outpaced suburban ones in 20 of 34 national markets evaluated. Cities including Boston, Washington, and Phoenix, in addition to Philadelphia, were standouts, Zillow found, as well as "other cities with fast-changing downtowns."
Yet Gillen's analysis showed that values in Philadelphia, in particular, are appreciating faster than in many cities. Behind that, economists say: Philadelphia, long considered among the most affordable big cities, simply has more to gain.
"Historically, Philly tends to lag most other cities," Gillen said. "They began recovering sooner and much faster than us, and have since slowed. In the meantime, we've finally hit our pace."
That's evident even in the region's first-quarter median home prices: $137,500 in the city, Gillen found, and $216,000 in the seven suburban counties.