Frenzy in real estate buying

**thesomersteam** · 05-28-2012, 08:06 AM

Good discussion here. Nice to see you Ori (we should hook up soon for that coffee). As a landlord, I typically do not raise rents either for long term tenants, but I do foresee rents going up more once the real estate taxes go higher. For example, I have a number of properties in 19122 which could get hit hard with the real estate tax reassessment. I also will have no choice to pass that cost along to the tenants once the taxes are hiked for the third year in a row (another story). Is great to hear about the activity in Point Breeze and Grad Hosp. We just had a very happy buyer for a fabulous new home in Point Breeze who was paying outrageous rent for a crappy place in Grad Hospital.

It is great to see all the activity over town. I do have a sense though that things will ease a bit after the election no matter who wins. Either way, what an opportunity for both new homeowners and investors to be owning real estate.

**ofeibush** · 05-28-2012, 10:57 AM

Wouldn't your raise in rental rates make you less competitive? New construction is not under the same burden. It is not as if all rents will go up and renters will have to make a choice of whether to rent or buy. Rather, renters will first get to decide as to what neighborhood they wish to live in because newer construction neighborhoods will have a competitive advantage.

As a property manager in Philadelphia, I never look at my client's debt service, insurance costs, or annual taxes. None of those numbers matter. I always hope that the rent I collect for them exceeds their carrying costs but if it doesn't.....nothing anyone can do. We charge as much as we can while still minimizing turn over, etc.

No one is leaving money on the table. You've made a decision that a slightly lower rent will reduce your turnover. You recognize that turnover costs you money. If your carrying costs go up, you will continue to make the same decision as higher rental rates will increase your turnover.

Your only hope is that everyone raises their rent at the same time through some collusive act. That will not happen.

**ofeibush** · 05-28-2012, 11:00 AM

Chris, Coffee shop opens in another two weeks....I'll buy you a cup at the opening

**Brooke** · 05-28-2012, 07:01 PM

I just sold two listings over the weekend...one with 3 offers in Rittenhouse. A few weeks ago, there was a bidding war for a listing of mine in S. Philly...and I got into 4 bidding wars in the burbs earlier this year. It's crazy.

What I see happening over and over as a lesson to you buyers out there: a house goes on the market and a buyer loves it but wants to see more...comes back for a second showing a few days later, thinks about it for a few days and then writes an offer, thereby giving many others the chance to put in offers. My advice to you is that if you see something you like, strike immediately and you may save a few thousand off something priced well. If you wait, you may very well pay full price or more.

**thesomersteam** · 05-30-2012, 08:06 AM

Ori - Sounds good. I might go for a latte! Where is the opening?

On a side note, due to this recent pick-up in the market, it is a great time for sellers to have their house listed now as chances are things will slow after the election.

**phillycat** · 05-30-2012, 03:11 PM

Originally Posted by thesomersteam

Ori - Sounds good. I might go for a latte! Where is the opening?

On a side note, due to this recent pick-up in the market, it is a great time for sellers to have their house listed now as chances are things will slow after the election.

what on earth would it have to do with an election? do you mean the presidential election?

**thesomersteam** · 05-30-2012, 10:42 PM

Yes, the Presidential election. Statistically, housing sales have dramatically slowed right after a President election, no matter who wins or loses. Hopefully that will not be the case going into 2013, but time will tell. Thus, if I am seller thinking about selling, the time is optimal with this uptick, knowing that a potential slow-down could occur after the election if history repeats itself again.

**ArcticSplash** · 05-30-2012, 11:36 PM

Originally Posted by ofeibush

Chris, Coffee shop opens in another two weeks....I'll buy you a cup at the opening

I'm gonna stand around outside drinking it and murmur comments "Mmmm... I love it they specially GENTRIFY their coffee with deliciously fresh Arabica beans!"

**JakeL** · 06-01-2012, 09:22 AM

Originally Posted by thesomersteam

Yes, the Presidential election. Statistically, housing sales have dramatically slowed right after a President election, no matter who wins or loses. Hopefully that will not be the case going into 2013, but time will tell. Thus, if I am seller thinking about selling, the time is optimal with this uptick, knowing that a potential slow-down could occur after the election if history repeats itself again.

The Redskins game before the election also predicts presidential elections. Correlation != causation.

**Eastcoast** · 06-01-2012, 09:58 AM

Originally Posted by thesomersteam

Yes, the Presidential election. Statistically, housing sales have dramatically slowed right after a President election, no matter who wins or loses. Hopefully that will not be the case going into 2013, but time will tell. Thus, if I am seller thinking about selling, the time is optimal with this uptick, knowing that a potential slow-down could occur after the election if history repeats itself again.

So let me ge this right, you are predicting that after the November Presidential election there will be a slowdown in the housing sales. That is a bold prognostication because as we all know the harvest will be in and the worst of the winter storms will not have started, seems like he perfect time to buy.

I would like to go on record and predict that following the Presidential Election Effect on the housing market (or PEE) there will be an uptic of home sales starting in say late March 2013 thru late April 2013.

**fiveomar** · 06-01-2012, 07:21 PM

Originally Posted by ofeibush

Wouldn't your raise in rental rates make you less competitive? New construction is not under the same burden. It is not as if all rents will go up and renters will have to make a choice of whether to rent or buy. Rather, renters will first get to decide as to what neighborhood they wish to live in because newer construction neighborhoods will have a competitive advantage.

As a property manager in Philadelphia, I never look at my client's debt service, insurance costs, or annual taxes. None of those numbers matter. I always hope that the rent I collect for them exceeds their carrying costs but if it doesn't.....nothing anyone can do. We charge as much as we can while still minimizing turn over, etc.

No one is leaving money on the table. You've made a decision that a slightly lower rent will reduce your turnover. You recognize that turnover costs you money. If your carrying costs go up, you will continue to make the same decision as higher rental rates will increase your turnover.

Your only hope is that everyone raises their rent at the same time through some collusive act. That will not happen.

Spot on. Rents are determined by supply/demand for rental housing, not by the property costs.

**eldondre** · 01-16-2013, 08:04 AM

Originally Posted by Brooke

I just sold two listings over the weekend...one with 3 offers in Rittenhouse. A few weeks ago, there was a bidding war for a listing of mine in S. Philly...and I got into 4 bidding wars in the burbs earlier this year. It's crazy.

What I see happening over and over as a lesson to you buyers out there: a house goes on the market and a buyer loves it but wants to see more...comes back for a second showing a few days later, thinks about it for a few days and then writes an offer, thereby giving many others the chance to put in offers. My advice to you is that if you see something you like, strike immediately and you may save a few thousand off something priced well. If you wait, you may very well pay full price or more.

it's been amazing to watch how the city housing market is now completely different than the rest of the region. as far as I can tell, property isn't moving outside the city the same way it is inside. people are buying up everything in francisville quickly. this is good for the city, we're not running out of neighborhoods in need of new investment.

**eldondre** · 01-16-2013, 08:04 AM

Originally Posted by Brooke

I just sold two listings over the weekend...one with 3 offers in Rittenhouse. A few weeks ago, there was a bidding war for a listing of mine in S. Philly...and I got into 4 bidding wars in the burbs earlier this year. It's crazy.

What I see happening over and over as a lesson to you buyers out there: a house goes on the market and a buyer loves it but wants to see more...comes back for a second showing a few days later, thinks about it for a few days and then writes an offer, thereby giving many others the chance to put in offers. My advice to you is that if you see something you like, strike immediately and you may save a few thousand off something priced well. If you wait, you may very well pay full price or more.

it's been amazing to watch how the city housing market is now completely different than the rest of the region. as far as I can tell, property isn't moving outside the city the same way it is inside. people are buying up everything in francisville quickly. this is good for the city, we're not running out of neighborhoods in need of new investment.

**Julia1020** · 01-17-2013, 09:44 AM

Originally Posted by ArcticSplash

That goalpost moves when every landlord in the market is hit with a doubling or tripling of the property tax bill. I don't think that's much of an issue in Point Breeze, but it will be in any area that's got healthy original housing stock that's due to get a rude awakening with AVI.

Just curious what you think the property tax situation will be post-AVI in Point Breeze. I am due to settle tomorrow on a property just south of Washington, and the tax is currently so low it's laughable...I'm trying to figure out realistically what it will be for 2014 and beyond. Do you think Point Breeze will not be hit as hard as, let's say, Graduate Hospital? Thoughts on what they'd use to determine fair market value?

**billy ross** · 01-17-2013, 10:21 AM

Originally Posted by Julia1020

Just curious what you think the property tax situation will be post-AVI in Point Breeze. I am due to settle tomorrow on a property just south of Washington, and the tax is currently so low it's laughable...I'm trying to figure out realistically what it will be for 2014 and beyond. Do you think Point Breeze will not be hit as hard as, let's say, Graduate Hospital? Thoughts on what they'd use to determine fair market value?

I'm hoping that over the entire city the effective annual tax rate will be .7 to .8% of value. A more pessimistic estimate would be 1.2% of value. Does anyone have any good numbers for values citywide and property tax receipts citywide for 2013? The ratio of real values to property taxes paid should be the same for 2014, with the distribution across properties different, of course. The only thing that should change in 2014 (citywide) is the nominal 'values' assigned by the city, and thus the tax rate. The total collected in 2014 citywide should be the same as the total collected citywide in 2013.

I don't know how they'll handle increases in collections activity, though. I'm guessing that properties coming off of abatement for 2014 and formerly tax delinquent properties which get redeveloped will add to property tax receipts for 2013 from 2012, and should also add to 2014's receipts relative to 2013, also. You can't pull permits to redevelop an abandoned building or an abandoned lot or a formerly tax-exempt church without having first brought the taxes current. Once they're redeveloped the bank will ensure that the taxes remain current, so all of the redevelopment activity that's occurring all over the city is great for both the city's property tax base and also the city's weak property tax collections system. It's getting a greater percentage of collections on a growing base of property value.

**Eastcoast** · 01-17-2013, 10:30 AM

Originally Posted by billy ross

I'm hoping that over the entire city the effective annual tax rate will be .7 to .8% of value. A more pessimistic estimate would be 1.2% of value. Does anyone have any good numbers for values citywide and property tax receipts citywide for 2013? The ratio should be the same for 2014, with the distribution across properties different, of course.

Provided of course that the values that they determine for the properties aren't horribly inflated.

**JakeL** · 01-17-2013, 10:43 AM

Originally Posted by Julia1020

Just curious what you think the property tax situation will be post-AVI in Point Breeze. I am due to settle tomorrow on a property just south of Washington, and the tax is currently so low it's laughable...I'm trying to figure out realistically what it will be for 2014 and beyond. Do you think Point Breeze will not be hit as hard as, let's say, Graduate Hospital? Thoughts on what they'd use to determine fair market value?

If all goes according to plan, the tax will either be ((sales price - $30,000) * .014) or (salesprice * .013). The difference between the two formulas is if there is a homeowner tax abatement or not.

**Julia1020** · 01-17-2013, 11:34 AM

Originally Posted by JakeL

If all goes according to plan, the tax will either be ((sales price - $30,000) * .014) or (salesprice * .013). The difference between the two formulas is if there is a homeowner tax abatement or not.

So they will just look at the most recent sales price....? What about homes that have not changed hands in years but that have been recently renovated?

**Burholme06** · 01-17-2013, 11:35 AM

Originally Posted by JakeL

If all goes according to plan, the tax will either be ((sales price - $30,000) * .014) or (salesprice * .013). The difference between the two formulas is if there is a homeowner tax abatement or not.

Well, I would say that the better word to use is “Actual Value” and not sales price. The City’s assessment may be higher, lower, or the very similar to the expected sales price. There have been some guessing that the City may be erring on the low side of value to prevent mass appeals.

I'm not sure where Billy is getting this 0.7 or 0.8 stuff.

**Julia1020** · 01-17-2013, 11:39 AM

Sorry to be such a newbie to all of this (first time homeowner) but how will the homestead exemption work for someone first buying in 2013? Will the city send out new forms in 2013 (for 2014) or is this something that should have been done by the seller in 2012 and that will carry forward to any subsequent owner?