Around the Block: 7/22/2022

First, are we in a recession? Who knows? Most economists think it will be a mild downturn, whatever it is. Some think the economy will rebound by the end of the year. Some think it will continue into 2023 and then rebound. Nobody knows.

In real estate, I most often hear that this slowdown is “normalization” and not a major downturn and certainly not a bubble. While no one ever knows for sure (I know I say that a lot–because it is true), that seems accurate to me. The issue is that when normalization follows a period of rapid, extreme acceleration, it tends to feel like a downturn. Everything is relative. For example, 6% interest rates are historically low. But coming off a decade of 3 to 5% they seem pretty high. One thing that is factually certain is how different this event is from the 2008 housing bubble:

• 2008 had tons of foreclosures. 2022 has very few foreclosures.

• 2008 had very high supply to drive down prices. 2022 has very low inventory, and this dearth of supply is keeping prices steadier, albeit certainly softer than during the spring. Though every house and neighborhood is different, so you really need to understand it case by case.

• 2008 had exceedingly high unemployment. 2022 has exceedingly low unemployment.

• The 2008 Great Recession was based on the failure of our housing and mortgage system. The 2022 situation is not directly related to housing, with global supply, labor shortages, and the related high inflation leading to this slowdown.

• I am no economist, and few things are as complex as the local/national/global economy and how they affect the real estate market. So, these are just a few summary thoughts.

• One thing I will always add is that the fundamentals in Philly remain strong. Despite our issues (and every place has issues), people want to live in Philly. It is desirable. I mean the Sixers just announced they want to build a multi-billion-dollar arena in Center City. That ownership group and their partners in this proposed arena are extremely savvy investors. They wouldn’t undertake this project unless they were bullish on the City and the economy. It is clear to me that Center City and the Philly neighborhoods are here to stay as desirable places to live.

Second, while on the subject of Philly as an awesome city, the Schuylkill River Trail is slated for another expansion. This article from billypenn.com explains the plan and provides more information about the SRT and Philly’s other 300+ miles of trails.

• I love walking in the woods and have always loved Philly’s trails. We currently live right off the Wissahickon Trails, and I particularly love regularly walking the quick loop by our home that offers woods, views, the creek, and never gets boring. Plus, another 50+ miles of Wissahickon trails to explore as well.

• When we lived in University City, we spent so much time at the John Heinz Natural Wildlife Refuge at Tinicum. What an amazing place for bird watching, walking, and biking, among other things. And like the Wissahickon, so easy to get to.

• And of course, the Schuylkill River Trail is one of the City’s highlights. This current extension will complete the connection between the stunning Bartram’s Garden and the Passyunk Avenue Bridge. By the way, if you have never been, Bartram’s Garden is absolutely worth a trip with family or friends. It is one of Philly’s jewels.

• The ultimate plan, of which this extension is a small part, is to complete a contiguous regional trail of 120 miles from Frackville in aptly named Schuylkill County to Fort Mifflin on the Delaware River in Southwest Philadelphia. 75 miles have been completed to date.

• I think one of the coolest parts of this entire SRT project through Philly is the fully operating swing bridge at Schuylkill Crossing, which will allow pedestrians to cross the Schuylkill at Grays Ferry and connect the east and west banks of the river. This should be ready at some point in 2023. This bridge has a lot of history and will swing into place to allow pedestrians to cross and then swing open to permit river traffic to navigate up and down the river. Really cool.

Third, the real estate market may not be as hot as it was earlier this year, but the temperature sure is. I hope everyone can stay cool and healthy and find ways to beat the heat and enjoy the weekend.

Thank you and warm regards,

Jeff