The timing of this article is coincidental as I just had this very conversation with an investor client of mine. This Philadelphia Magazine article touches on why home sales of “big money” properties on the Main Line are down. The following is simply speculative/my opinion.
It’s pretty well known that there’s a lot of “old money” on the Main Line. The majority of the large, expensive homes out that way have been in the family for years with little turnover compared to other areas. The baby boomers who grew up on the Main Line stayed in the area to raise their families due to familiarity and a lack of options (specifically urban) outside of neighboring suburbs.
As millennials, our circumstances differed a bit from our baby boomer parents. Not only did many of us graduate from college into a struggling economy with a bundle of school debt strapped to our back, but our beautiful city of Philadelphia now had an emerging downtown that offered a social scene with some intriguing living options that weren’t necessarily available to our parents in their mid-twenties to thirties.
At this point you may be asking how does this directly affects prices. Well, let me answer that question. Many people living in these huge Main Line homes are now empty-nesters, living in big, old homes on large plots of land that require lots of maintenance, have high property taxes, and they no longer utilize the schools. Center City, Philadelphia now offers new construction, luxury penthouses and townhomes with little maintenance, 10 year tax abatements, and more than enough living space. So, you’re seeing these “Main Liners” trade in their suburban mansions for high-end urban condos, such as 1706 Rittenhouse, 500 Walnut, The Murano, etc.
You’re next question may be who’s coming in and buying these Main Line properties. Unfortunately, the answer is a smaller fraction of the millennials as we too are loving city living, and rightfully so as it’s an awesome place to work, live, and play. It’s a simple case of supply and demand. Supply is up as empty-nesters are swapping their Main Line homes for urban retreats. Demand is down because the millennials who should be replacing the baby boomers on the Main Line are also enjoying downtown living. When supply is up and demand is low, prices drop.
People are now waiting a little longer to start their families than prior generations. The biggest variable in the equation is school districts. It’s no secret that the Philadelphia public school system doesn’t have the greatest reputation. It’s also common knowledge that the Main Line has some of the best public schools in the state, if not the country. Soooo, the big questions are will the Philadelphia school system improve keeping people in the city, will private schools gain greater traction due to people wanting to remain in the city, or will the millennials be moving back to the Main Line as their kids reach school age? I guess time will tell.