A brighter future for starter homes?
By Alan J. Heavens
The Philadelphia Inquirer, August 16, 2010
Remember the starter home? Some were two-bedroom, one-bath Philadelphia rowhouses that first-time owners would squeeze into for a few years while they amassed enough equity - and children - to make buying something larger a good idea.
In the 1980s, however, first-timers began bypassing the starter home for the four-bedroom, four-bath "perfect house." One legacy of that today: in more than a few cases, foreclosure.
Developer David W. Feldman is trying to rekindle buyer interest in the city's starter homes by making them not only affordable, but energy-efficient and rehabilitated with sustainable materials.
Feldman, of Right-Sized Homes of Philadelphia, is one of a growing number of developers and contractors working with the city Redevelopment Authority's $20 million Neighborhood Stabilization Program 1 to acquire and rehab vacant houses in neighborhoods with high foreclosure rates.
So far, Feldman, an architect by education, has completed three houses, is working on his fourth, and is waiting to acquire a fifth.
His latest, a two-bedroom, one-bath rowhouse at 1331 S. Myrtlewood St., near 29th Street and Grays Ferry Avenue, is listed at $137,500.
The first, in Fern Rock, sold for $124,900. The second, in Overbrook, is under contract for $104,900.
Since July 1, 2009, the Redevelopment Authority program "has provided financing to acquire and rehab 64 properties," executive director Terry Gillen said.
Twelve houses have been sold to eligible buyers, and four are under agreement of sale. The program's 64 properties represent an investment of $10.7 million, Gillen said.
Myrtlewood Street and the blocks surrounding it are highly diverse in population, with a mix of renters and owner-occupants. Most have been in their homes for many years.
What makes this a good spot for first-time buyers is proximity to Grays Ferry Avenue, Feldman said.
"It has become so visible since the South Street Bridge closed for replacement, and less scary," he said.
"Look at the number of bicyclists using Grays Ferry to get from Center City to University City," he said - they ride by, see the neighborhood and the new Pathmark and shopping area nearby, and recognize its convenience.
"There is easy bicycle storage," Feldman said, pointing to the gated space at the side of the house that also includes a Pennsylvania Horticultural Society demonstration garden.
During the real estate boom years, investors saw possibilities in this neighborhood, served by three bus routes, and others like it in Philadelphia. But the investor who bought 1331 and seven others around the city hoping to turn them into rentals lost them to foreclosure.
In a study last month, researchers at the Massachusetts Institute of Technology reported that foreclosure reduces the value of a house 27 percent, on average, and that when one house loses value in an economically challenged neighborhood, the rest do, as well.
Rehabbed houses purchased through the Neighborhood Stabilization Program must be owner-occupied for 15 years. Buyers must have incomes not exceeding 120 percent of this area's median ($65,400 for a single person, $93,360 for a family of four) and must complete counseling by a HUD-approved agency.
After Feldman acquired 1331 Myrtlewood - minus the side lot, which he purchased separately - his task was to determine "how to convert 900 square feet into something to accommodate modern lifestyle."
"My grandfather was one of 10 children living in a two-story rowhouse at Third and McKean," said Feldman, who, as an architect, helped turn Wanamaker's 12-story department store into five stories.
"People use houses differently today," he noted.
The Myrtlewood sale closed in October. Although delayed by the snowy winter, his contractor, Melrose Inc., began by rebuilding and insulating a rotted rear addition.
Interior spaces on the first and second floors were reconfigured to make them roomier, and windows were enlarged and repositioned to bring in the most natural light, to cut energy costs. The bathroom was reconfigured, too, with a 1.2-gallon low-flush toilet and new fixtures.
Rooms were designed to accommodate multiple uses. Wasted space became "bonus rooms," storage, and a second-floor laundry area.
The cost of the rehab - which included sustainable tile and bamboo floors rather than oil-consuming vinyl, carpeting with recycled material, a required reflective "cool" roof, ceiling fans, and new windows and doors - ran $65,000 to $75,000, subsidized by the Neighborhood Stabilization program.
Some of the purchase price will be recouped and returned to the program for reuse.
The neighborhood reminds Feldman of the Graduate Hospital area, where he bought his starter house in 1986, after graduating from Harvard's Graduate School of Design.
"The rent I get from that house is sending my daughter through Penn," he said and laughed.
In the 1980s, however, first-timers began bypassing the starter home for the four-bedroom, four-bath "perfect house." One legacy of that today: in more than a few cases, foreclosure.
Developer David W. Feldman is trying to rekindle buyer interest in the city's starter homes by making them not only affordable, but energy-efficient and rehabilitated with sustainable materials.
Feldman, of Right-Sized Homes of Philadelphia, is one of a growing number of developers and contractors working with the city Redevelopment Authority's $20 million Neighborhood Stabilization Program 1 to acquire and rehab vacant houses in neighborhoods with high foreclosure rates.
So far, Feldman, an architect by education, has completed three houses, is working on his fourth, and is waiting to acquire a fifth.
His latest, a two-bedroom, one-bath rowhouse at 1331 S. Myrtlewood St., near 29th Street and Grays Ferry Avenue, is listed at $137,500.
The first, in Fern Rock, sold for $124,900. The second, in Overbrook, is under contract for $104,900.
Since July 1, 2009, the Redevelopment Authority program "has provided financing to acquire and rehab 64 properties," executive director Terry Gillen said.
Twelve houses have been sold to eligible buyers, and four are under agreement of sale. The program's 64 properties represent an investment of $10.7 million, Gillen said.
Myrtlewood Street and the blocks surrounding it are highly diverse in population, with a mix of renters and owner-occupants. Most have been in their homes for many years.
What makes this a good spot for first-time buyers is proximity to Grays Ferry Avenue, Feldman said.
"It has become so visible since the South Street Bridge closed for replacement, and less scary," he said.
"Look at the number of bicyclists using Grays Ferry to get from Center City to University City," he said - they ride by, see the neighborhood and the new Pathmark and shopping area nearby, and recognize its convenience.
"There is easy bicycle storage," Feldman said, pointing to the gated space at the side of the house that also includes a Pennsylvania Horticultural Society demonstration garden.
During the real estate boom years, investors saw possibilities in this neighborhood, served by three bus routes, and others like it in Philadelphia. But the investor who bought 1331 and seven others around the city hoping to turn them into rentals lost them to foreclosure.
In a study last month, researchers at the Massachusetts Institute of Technology reported that foreclosure reduces the value of a house 27 percent, on average, and that when one house loses value in an economically challenged neighborhood, the rest do, as well.
Rehabbed houses purchased through the Neighborhood Stabilization Program must be owner-occupied for 15 years. Buyers must have incomes not exceeding 120 percent of this area's median ($65,400 for a single person, $93,360 for a family of four) and must complete counseling by a HUD-approved agency.
After Feldman acquired 1331 Myrtlewood - minus the side lot, which he purchased separately - his task was to determine "how to convert 900 square feet into something to accommodate modern lifestyle."
"My grandfather was one of 10 children living in a two-story rowhouse at Third and McKean," said Feldman, who, as an architect, helped turn Wanamaker's 12-story department store into five stories.
"People use houses differently today," he noted.
The Myrtlewood sale closed in October. Although delayed by the snowy winter, his contractor, Melrose Inc., began by rebuilding and insulating a rotted rear addition.
Interior spaces on the first and second floors were reconfigured to make them roomier, and windows were enlarged and repositioned to bring in the most natural light, to cut energy costs. The bathroom was reconfigured, too, with a 1.2-gallon low-flush toilet and new fixtures.
Rooms were designed to accommodate multiple uses. Wasted space became "bonus rooms," storage, and a second-floor laundry area.
The cost of the rehab - which included sustainable tile and bamboo floors rather than oil-consuming vinyl, carpeting with recycled material, a required reflective "cool" roof, ceiling fans, and new windows and doors - ran $65,000 to $75,000, subsidized by the Neighborhood Stabilization program.
Some of the purchase price will be recouped and returned to the program for reuse.
The neighborhood reminds Feldman of the Graduate Hospital area, where he bought his starter house in 1986, after graduating from Harvard's Graduate School of Design.
"The rent I get from that house is sending my daughter through Penn," he said and laughed.