The word on condos: Ambiguous

It's surprisingly hard to find one word that describes today's Center City condo market, the engine that drove the region during the real estate boom.

Among the possibilities tossed out by local observers of the city's condo scene: strengthening, frustrating, interesting, bottoming, soft, challenging, stable.

At the higher price points, 10 Rittenhouse, the $300 million, 33-story, Robert A.M. Stern signature building on South 18th Street near Walnut, is set for a Nov. 10 grand opening, with the first residents moving into units starting in the low $600,000s.

The building's cost has risen significantly, by $100 million since it was proposed six years ago, because of delays over legal issues. The opening originally was set for summer 2007, as the local boom was beginning to bust.

A few blocks away, 1706 Rittenhouse Square Street, which was delayed for three years also because of legal matters, has been topped off, and more than half the units, which start at $4 million, have been sold.

Meanwhile, at the lower edge of the market's current "sweet spot," the Pearl Condominiums at Ninth and Arch Streets in Chinatown - with prices starting at $220,000 - have sold out, three years after developers broke ground.

Robert Zuritsky of Parkway Corp., who was involved in both 1706 Rittenhouse and the Pearl, suggested that strengthening best describes the market now.

"As the stock market continues to recover, buyers are feeling more confident and beginning to reemerge," Zuritsky said.

It is the same word 1706 Rittenhouse codeveloper Tom Scannapieco offered.

He said record prices for Philadelphia "are being set in 2009 by the very affluent, who are showing unprecedented interest in Center City. The robust activity at the very top of the residential market reflects a fundamental shift in attitude toward Philadelphia."

But while some projects appear to be doing well, others remain problematic.

For example, the 55 unsold units at Aria Condominiums at 1419 Locust St. will be heading to sheriff's sale Tuesday. A developer is reported to have his eye on the units, which are considered likely to return to the market at more competitive prices soon. Aria has been in receivership since January; its sales office stopped selling about a year ago.

Delta Associates, which tracks the market, says there are 5.5 years' worth of condos "in the marketing pipeline." That led economist Kevin Gillen to propose the description frustrating.

"We haven't seen the plunges in sales and prices that the Sun Belt markets have seen, but that's because we didn't overbuild or overleverage ourselves like they did," said Gillen, vice president of Econsult Corp., of Philadelphia.

"We still have a large supply overhang that we need to work off, however, and since sales are running below average levels, this will continue to put downward pressure on both prices and developers' bottom lines.

"But frustrating is preferable to dismal or suicidal, which could definitely be used to describe those other markets," Gillen said.

The region's condo market is, for all intents and purposes, a Center City phenomenon.

Delta Associates' third-quarter numbers for new units show that of the 208 sold here, 162 were in Center City. Data from the city's Recorder of Deeds show that 53 of the units that went to settlement were at the Murano, at 21st and Market Streets.

Forty of those condos were sold in a single afternoon, at a June 27 auction, and for prices at or close to the Center City median sales price of $250,000. The rest were bought later by unsuccessful bidders, or by buyers attracted by the publicity surrounding the event.

Interesting best characterizes the condo market, said Jon Gollinger, president of Accelerated Marketing Partners, of Boston, who conducted the Murano auction for Thomas Properties Group Inc. Pricing here is driven by the perception that there is a better world two years down the road, he said.

But broker/developer Allan Domb favored bottoming, because of the "increase in the number of sales under $500,000."

Where do condo prices stand in Center City two years into the local housing downturn, and where might they go?

Gillen's latest calculations, for third quarter 2009, put the cumulative house-price loss for the city at 8 percent, compared with 32 percent for similar cities nationwide.

Fiserv Case-Shiller, which periodically offers city numbers even though Philadelphia is not included in the monthly S&P Case-Shiller 10- and 20-city lists, indicates that prices have fallen 3.3 percent in the last year, and anticipates an additional drop of 4.2 percent in the next 12 months.

National prices will drop 11 percent in the same period, said Fiserv chief economist David Stiff, so comfort might be an apt description.

First American CoreLogic Inc. puts the Philadelphia year-over-year drop in prices at 5.5 percent and predicts that prices will appreciate -0.83 percent from now until August.

Delta Associates simply says: "Price traction could return to the market by 2011-12, once the economy starts to recover and jobs are created in the metro area again."

The data, from economists who do not spin for housing trade groups, seem to support flat, the adjective Philadelphia Realtor/mortgage broker Fred Glick applied to the condo market.

Soft is how Residences at Ritz-Carlton developer Craig Spencer described it.

Activity at the Ritz is high, yet "buyers are cautious and most aren't pulling the trigger until they're more confident about where the economy is going," Spencer said. "When confidence in the economy returns, I believe many of the 'window shoppers' will turn into real buyers."

In other words, a challenging market, to use developer Carl Dranoff's word.

"Developers and sellers need to be very nimble and decisive because the changes in market and financing conditions are swift," he said.

Still, real estate agent Mark Wade, who focuses on the low- and mid-rise condo market, seconded Gillen's observation on prices and saw the market as being stable.

Said Wade, "Slow and sure wins the race every time."