The Economy | Franklin meets housing market

By Andrew Cassel
Inquirer Columnist

I keep trying to put Ben Franklin back on the history shelf, but he just won't go. For somebody 300 years old, Philadelphia's favorite Founding Father has some awfully contemporary things to say.

Check out this passage from Franklin's autobiography, for instance:

"There are croakers in every country, always boding its ruin. Such a one then lived in Philadelphia; a person of note, an elderly man, with a wise look and a very grave manner of speaking; his name was Samuel Mickle.

"This gentleman, a stranger to me, stopped one day at my door, and asked me if I was the young man who had lately opened a new printing-house.

"Being answered in the affirmative, he said he was sorry for me, because it was an expensive undertaking, and the expense would be lost; for Philadelphia was a sinking place, the people already half-bankrupts, or near being so; all appearances to the contrary, such as new building and the rise of rents, being to his certain knowledge fallacious; for they were, in fact, among the things that would soon ruin us.

"And he gave me such a detail of misfortunes now existing, or that were soon to exist, that he left me half melancholy. Had I known him before I engaged in this business, probably I never should have done it.

"This man continued to live in this decaying place, and to declaim in the same strain, refusing for many years to buy a house there, because all was going to destruction; and at last I had the pleasure of seeing him give five times as much for one as he might have bought it for when he first began his croaking."

Just like today

The more things change, the more they stay the same.

Shift forward a couple of centuries. Imagine the young Franklin setting up shoppe in Old City, say around 1980.

Now imagine a latter-day Samuel Mickle, putting the new kid straight about the city's sorry-looking prospects.

(You don't have to imagine hard. Just recall the infamous billboard posters of those years, which tried to attract tourists with the arresting-yet-pathetic message: "Philadelphia isn't as bad as Philadelphians say it is.")

Anyway, suppose Ben were reflecting in 2006 on that chance meeting a quarter-century ago and wondering what Mickle had paid for that Center City condo he finally gave in and bought.

Turns out Franklin had it right, as usual.

Assuming the price of Mickle's new pad was typical of house prices here, it would have cost him about five times as much as a typical Philadelphia house in 1980.

That's according to the index of local housing prices compiled by researcher Kevin Gillen at the Wharton School.

Indexing the price increases

Gillen's index shows that the median price for a city home rose from the low $20,000s in 1980 to about $110,000 last year.

That's more real estate appreciation than in the nation as a whole, where home prices since 1980 have multiplied a bit less than fourfold.

One could conclude, then, that, over the long term, Philadelphia hasn't done so badly. But of course, the story is far from finished.

Markets, as Franklin also knew well, go up and down, and yesterday's boom can be the source of tomorrow's bust.

If anything, Philadelphia has recently suffered a shortage of Samuel Mickles. Croakers were scarce as prices for lofts and townhouses broke records. Not long ago, I heard a Center City broker brag that, for the city's trendiest digs, "$2 million is the new $1 million."

But that could change. Prices are no longer soaring, if not actually falling, both in Philadelphia and nationwide. Sales have slowed, and the inventory of unsold homes and condos is rising as mortgage rates rise and buyers turn cautious.

Some market-watchers say we should expect the flat prices and slow sales for some time. And they're the optimists.

The croakers may yet have their day.