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Philadelphia Housing Quarterly Market Update: Q1 2014

Philadelphia’s Housing Continues to Exhibit Bipolar Symptoms in 2014 Q1  by Kevin Gillen

Prices and sales continue to rise in affluent neighborhoods, but decrease or remain flat in others.

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April 14, 2014: Although it has been two years since Philadelphia house prices hit their post-recession bottom, its recovery has not only proceeded in fits and starts, but has also been unevenly—and inequitably—spread across the City’s neighborhoods. The latest stats continue to confirm this trend, indicating improved market conditions in either relatively high-income or gentrifying areas, but continued stagnation or even decline in the rest of the City. The average house value in Philadelphia declined by 4% in Q1, according to the latest data from the City’s Recorder of Deeds. However, this citywide average blends price increases in some neighborhoods with price decreases in others.

 

House prices generally increased in Philadelphia’s more affluent or revitalizing neighborhoods, but fell in most remaining parts of the City, with the poorest neighborhoods experiencing the largest declines. From smallest to largest, the average change in house prices by neighborhood in Q1 were: West Philadelphia (-17.5%), North Philadelphia (-12.9%), Kensington/Frankford (-6.1%), Upper Northeast Philadelphia (-5.9%), Lower Northeast Philadelphia (-5.7%), Northwest Philadelphia (-2.2%), South Philadelphia (+2.5%), University City (+2.7%) and Center City/Fairmount (+6.8%).

 

The median house price in Philadelphia fell to $110,000 in Q1, a 13% decrease from $127,000 in the previous quarter.

 

Home sales volume continued to increase this past quarter on a seasonally-adjusted basis, although activity remains relatively skewed towards the higher-priced vicinities of the City. There were 3,148 arms-length transactions in Q1, up from 2,849 a year ago and up from 2,503 in their post-recession low three years ago. While sales activity is trending positively, overall volume still remains below its historic average of approximately 3,800 sales per quarter. Notably, however, sales of million-dollar homes continue to run well above their historic average, providing further evidence that Philadelphia’s housing recovery remains skewed towards the upper segment of the market.

 

Although price changes remain varied across neighborhoods, this quarter’s citywide average decline has returned Philadelphia’s house price index to near its post-recession low of two years ago. Currently, the index has a value of 375.4, which is only slightly above its value of 372.0 in 2012 Q2.

 

Inventories of homes listed for sale also continued their decline in Q1. Currently, there are 6,798 homes listed for sale in the city, which is very close to the pre-bubble historic average of approximately 6,000, and down significantly from its peak of over 12,000 back in 2006. This decline in surplus inventory combined with the upward trend in sales activity should provide some optimism that supply and demand are continuing to move towards being back in balance with each other.

 

To what extent this quarter’s mixed numbers may be attributable to the adverse effects of an exceptionally cold polar vortex-induced winter is unclear. However, while some neighborhoods in Philadelphia appear to be in full resurgence, the lack of citywide price appreciation stands in marked contrast to those of most other U.S. cities.

 

According to Case-Shiller’s house price indices for the twenty largest U.S. cities, price recovery remains strong and steady in most other cities, compared to Philadelphia’s variance and unevenness. That Philadelphia’s recovery will continue in this way for the near future is supported by the most recent house price forecast from Zillow, which is projecting Philadelphia’s house prices to rise only 1.3% over the course of the next twelve months, while forecasting a 3% increase for the U.S. as a whole.

 

 

 

 

 

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Modern New Construction! Olde Richmond 19125

Looking to buy a newly constructed, modern and spacious home? Located on the 2500 block of Sepviva Street these homes offer a great space for newly weds, families or anyone looking for a custome luxury home at a great price. Offering black brick facade, 9′ ceilings, finished basement, hardwood floors, stainless steel appliances, granite countertops, a large yard and more. Check out the renderings. We like the look of these modern homes and the neighborhood is convenient to everything the City has to offer.

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Starting at $315,000 these are priced competitively on the market in a growing area of north Philadelphia. Want more information? Contact Larry at LiveLovePhilly for further details.

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Philadelphia Housing Market Quarterly Update Q3 2013

 

Philadelphia Housing Holds Steady in Q3 by Kevin Gillen
Prices, sales remain flat, although inventories continue to decline.

October 24, 2013: Philadelphia’s housing market continued its stop-an-go pattern of recovery this past summer, with both house prices and sales remaining essentially unchanged from the previous quarter, even after rising sharply this past spring. 

The average house value in Philadelphia declined by 0.7 percent in Q3, according to the latest data from the City’s Recorder of Deeds. This number is considered small enough so as to be statistically indistinguishable from zero. 

House prices were generally flat citywide, with a few exceptions. From smallest to largest, the average change in house prices by neighborhood in Q3 were: North Philadelphia (-1.2%), Upper Northeast Philadelphia (-1.1%), Lower Northeast Philadelphia (0.0%), Northwest Philadelphia (0.0%), Center City/Fairmount (+0.2%), Kensington/Frankford (+0.7%), University City (+3.7%), South Philadelphia (+4.0%), and West Philadelphia (+8.1%).

The median house price in Philadelphia increased to $139,900 in Q2, a 6.0% increase over the median price of $132,000 in the previous quarter and a 7.6% increase over the median price of $130,000 one year ago. However, these increases are disproportionately due to sales being skewed towards the upper end of the market, as many relatively lower-income households remain on the sidelines of the current recovery due to sluggish economic conditions and tight credit conditions. Evidence of this is given by the continuing divergence between Philadelphia’s median house price (which is affected by this upward bias towards higher-priced homes) and the indexed house price (which is computed via a regression that eliminates this upward bias). This spread currently stands at nearly $50,000, and has been growing ever since the housing bust effectively eliminated many low income buyers from the market, In addition, home sales in the million dollar-plus price bracket remain well above their historic levels, despite overall home sales still remaining below their average historic levels.  

 


Currently, Philadelphia’s housing stock has recovered 9% of its lost value since the bursting of the housing bubble in 2007. Because house values here fell an average of 21% during the bust, this implies that they need to appreciate by another 12% in order to fully recover the value lost during the recession. 

Home sales activity was also flat this quarter. There were 3,614 arms-length transactions in Q3, which was exxentially unchanged from the previous quarter, but is up 9/2% from 3,311 sales one year ago.

Philadelphia’s recovery still stands in stark contrast to those of other cities. Although Philadelphia’s housing neither appreciated nor depreciated as much as most other large U.S. cities during the housing boom and its subsequent bust, it is still lagging in its recovery. House prices in cities such as Atlanta, San Francisco, Portland, and Minneapolis have recovered approximately half of their lost value, while Philadelphia has recovered only a little more than a third. In Dallas and Denver, house price increases have been sufficiently large that not only have these cities fully recovered their lost values, but house price levels there are currently above their pre-bust peaks. 

The following chart ranks large U.S. cities by their total peak-to-trough decline in house prices, with the blue areas of each bar indicating the percent that house prices have recovered their value and the red areas indicating the percent that remains before the total loss is completely recovered.:


While Philadelphia’s housing market does generally tend to lag national trends, the currently sluggish recovery may be a sign that the market remains uncertain about the future of various local public policies that are likely to affect the future of our housing market. These issues include: the next round of AVI assessments, the possible creation of a land bank, potential reductions in our high delinquency rate of property taxes, and the future of the Ten-Year Tax Abatement. 

  For more information about Philadelphia’s Housing Market and past market updates, CLICK HERE

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Philadelphia Housing Market Quarterly Update Q2 2013

 Philadelphia Housing Market Picks Up in Q2.  By Kevin Guillen

Despite high-profile concerns over AVI and tax delinquencies, both sales and prices increase across the city.

July 15, 2013: After hitting bottom just over a year ago and struggling to rebound, Philadelphia’s housing market finally exhibited some signs of vitality this past spring.

The average house value in Philadelphia increased by 3.1 percent in Q2, according to the latest data from the City’s Recorder of Deeds. This increase comes on the heels of several years of bumpy declines before the market bottomed out last winter.

House price gains were generally experienced citywide, with only two exceptions. From smallest to largest, the average change in house prices by neighborhood in Q2 were: University City (-7.8%), West Philadelphia (-5.9%), Upper Northeast Philadelphia (+1.2%), Lower Northeast Philadelphia (+2.6%), Kensington/Frankford (+3.8%), Center City/Fairmount (+3.8%), Northwest Philadelphia (+3.9%), South Philadelphia (+5.4%), and North Philadelphia (+7.9%).

The median house price in Philadelphia increased to $132,000 in Q2, a 6.3% increase over the median price of $124,000 in the previous quarter and a 5.5% increase over the median price of $125,000 one year ago.

These most recent gains in house values seem to indicate that Philadelphia is finally making significant inroads in regaining the value lost since the housing bubble burst. From peak to trough, house values in Philadelphia declined an average of 21%. This quarter’s recent gains have recovered 8% of the lost value, implying that house values need to appreciate another 13% to return to their pre-bust levels.

Home sales activity also showed some gains this past quarter. There were 3,614 arms-length transactions in Q2, up from 2,849 in the previous quarter and up from 3,079 sales that took place in the same quarter last year. This was the strongest second quarter for home sales since 2010 Q2.

The recovery also appears to be becoming more democratic and widespread. While house prices and sales began to recover in the higher-end segment of the market over a year ago, this recovery had—until now—been confined to the relatively upper-income neighborhoods in Philadelphia. In most neighborhoods, prices and sales had remained stagnant. In Q2, there were 16 sales at a price point of $1m or more, up from 13 sales in Q1, and well above the quarterly average of just 9. However, the largest price jump this past spring was in North Philadelphia (+7.9%); which is historically Philadelphia’s lowest-priced and lowest-income neighborhood. Moreover, the lower-priced segment of the market also saw the biggest percentage price increase in Q2. From Q1 to Q2, the bottom fifth of the market (i.e. the 20 percent lowest-priced homes in Philadelphia) saw their average price increase from $25 per square foot to $50 per square foot; a doubling in value.

This recovery is especially notable in light of the citywide property re-assessment (known as the Actual Value Initiative, or AVI) and the increase in Philadelphia’s property tax delinquency rate; both of which were the subject of vocal criticism from many community groups, public officials and activists this past spring1. The predicted exodus of households and subsequent decline in house values that many critics contended would be the outcome of the (supposedly) flawed assessments and lax tax collection practices not only didn’t materialize, but if anything, the market seems to have largely reacted positively to both the new assessments and the City’s announced intention to improve its collection of delinquent taxes.

While Philadelphia’s long-awaited housing recovery is still lagging the recovery that is already well underway in most other U.S. cities, leading indicators continue to indicate a positive near-term outlook:

  • The average price-to-rent ratio for Philadelphia homes has begun to trend upwards again, after declining for several years since the housing bubble burst. After falling from a peak of 13.3 in 2007 to a low of 9.5 in early 2012, the ratio has since increased to 10.0. A rising price-rent ratio is typically associated with a bullish outlook on house prices.
  • The inflation-adjusted house price index has also begun to trend upwards, after declining for several years. This suggests that the recent house price gains are not just due to general price inflation in the overall macroeconomy.
  • Days-On-Market, which is the average number of days it takes for a listed home in Philadelphia to sell, is down to 70 days from its peak of 95 days just over one year ago.
  • A particularly notable threshold was crossed by the National Association of Homebuilders Housing Market Index this past spring. Based upon a scale of 0 to 100, the index recently crossed 50, indicating that for the first time since 2006, more homebuilders are optimistic than pessimistic about the near-term outlook for housing.

 An especially notable sign of improvement in Philadelphia’s housing market are the significant improvements in both the market’s housing inventory and absorption rate this past spring. After declining markedly since the market bottomed last winter, the number of home listed for sale in Philadelphia is down to approximately 8,000 from its all-time peak of just over 12,000. Such a large supply relative to demand had been placing significant downward pressure on house prices over the last several years. Moreover, the absorption rate—which measures the percent of listed homes that sell in a given period—increased sharply this past to nearly 16%, up from its all-time low of 6% two years ago. Both indicators suggest that supply and demand are returning to a relative balance that is in line with their historic averages.

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While this most recent data suggest that the long-awaited recovery is finally happening in Philadelphia, there is growing concern in many other cities that the news is actually too positive. House prices have been rebounding sharply in many other cities over the past year, at a rate that significantly exceeds not only inflation, but also their fundamentals, such as population, income and rents. Combined with an outlook for higher mortgage rates in the near term, many economists are forecasting a ‘cool down’ in housing market activity over the course of the next year. But, given that good news about housing has taken so long to arrive to Philadelphia, and that it came at a critical time in reforms to the city’s housing policy (i.e. AVI, delinquencies), it would seem that most Philadelphia households would be justified in at least momentarily savoring the good news before beginning to worry again.

 

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