national realty investment advisors, llc supports fels institute report on philadelphia housing...

© 2013 Fels Institute at U. Penn.| [email protected]

State of the Philadelphia Housing Market

KEVIN C. GILLEN, Ph.D.

[email protected]

Disclaimers and Acknowledgments: The Fels Institute of Government at the University of Pennsylvania provides this report free of charge to the public. The report is produced by Fels Senior Research Consultant Kevin Gillen, in association with the University of Pennsylvania Institute for Urban Research. The author thanks Azavea.com, the Philadelphia Office of Property Assessment, the Federal Housing Finance Agency, Case-Shiller MacroMarkets LLC, RealtyTrac, Zillow.com, Trulia.com and the NAHB for making their data publicly available.

© 2013, Fels Institute of Government, All Rights Reserved.

September 17, 2014


Recovery is here, but uneven and sluggish

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House Price Indices 1980-2014: 1980Q1=100Philadelphia County v. Philadelphia MSA and U.S. Average

Phila. County*

Phila. MSA**

U.S. Avg.**

Q2

7% increase after 20% decline


Our recovery lags most other cities:

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House Price Appreciation 1987-2014: Philadelphia v. 10-City Composite

10-City Composite*

Philadelphia

% Change 10-City Philadelphia1998 to Peak: +173% +136%From Peak: -19% -13%


Philadelphia got off rather easy during the downturn:

-20%-17%

-7%

-14%-22%

-10% -8%

-21% -21%-18%

-21%-16%

-26%-23% -24%

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-26%

-18%-21% -19%

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-3%

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-9% -12% -16%

-17%-23%

-13% -18% -19%

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-23%-34%

-35%-42%

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Housing's Road to Recovery: %Lost v. %Recovered

%Remaining

%Recovered

Now that the housing market's recovery appears to have arrived, this chart shows how much house prices need to rise in each city in order to erase the cumulative losses from the bust. The total rebound (to date) in house prices is shown by the blue bars, while the remaining losses are shown by the red bars. For example, Philadelphia county's average house prices fell by a cumulative 20% from peak to trough. To date, they have rebounded by 7%, which implies they need to rise another 13% in order to return to their pre-bust peak levels. Source: Kevin C. Gillen, Ph.D. All other cities courtesy S&P/Case-Shiller.


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Number of Philadelphia House Sales* per Quarter: 1980-2014

Q1

Q2

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Q4

Qtly. Average

62% decline from peak, but are now trending up.


Million dollar-plus home sales remain strong:

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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Number of Philadelphia Home Sales* per Quarter with Price>=$1 Million: 1997-2014

Q1

Q2

Q3

Q4

Qtly. Average


Recovery skewed towards higher-priced homes:

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Median Philadelphia House Price v. Indexed Philadelphia House Price1980-2014

Median Price

Indexed Price*

Q2


Sales skewed towards higher-priced homes:


Note encroachment of higher-priced homes:


Rent appreciation skewed as well:

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-10% 0% 10% 20% 30% 40% 50% 60% 70%

Cedarbrook

Oxford Circle

Lawncrest

Wissinoming

Mount Airy

West Oak Lane

Tacony

East Germantown

East Oak Lane

Holmesburg-Torresdale

Point Breeze

East Passyunk

Queen Village-Pennsport

Center City West

Fairmount-Spring Garden

Fishtown

Bella Vista

Powelton

Cedar Park

University City

Top 10 v. Bottom 10: Changes in Average House Rents by Philadelphia Neighborhood, 2010-2014


Rents up significantly, even as house prices down:

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Philadelphia Rents v. House Prices: 2010-2014

Median Rent

Median House Price

Rents up 16% House Prices down -1.5%


Price-Rent Ratio at 10-year low

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Average House Price-to-Rent Ratios*: 1980-2014Philadelphia v. U.S.

U.S.

Philadelphia

*Computed by taking the ratio of average house price to the average annual rent of a comparable housing unit. The P/R ratio is to real estate what the P/E ratio is to other assets. Contact [email protected] for further details.


Inventories beginning to uptick again?

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Philadelphia Houses Listed For Sale: Inventory v. Absorption Rate

# Houses Listed For Sale

% Absorbed

# H

om

es L

iste

d "

Fo

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" %A

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= (#

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s/#

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s)


Homes are moving at a faster pace:

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Average Days-on-Market* for Philadelphia Homes

*Days-on-Market (DOM) is the average number of days it takes for a listed house to sell.

# o

f D

ays


Economy still sluggishly recovering:


Unemployment slow to decline:


Interest rates are heading up again:


Homebuilders feeling more optimistic:

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Index of Homebuilder Sentiment: 1985-2014(Seasonally Adjusted)

National

Northeast

The Index represents the current sentiment of U.S. homebuilders. The index is computed via a regular monthly survey of homebuilders. An index value above 50 indicates that more builder are optimistic than pessimistic, while an index value below 50 indicates that more builders are pessimistic than optimistic.


Markets more bullish on housing:

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Philadelphia Stock Exchange Housing Sector Index: 2002-2014

The PHLX Housing Sector Index is a modified cap-weighted index composed of 20 companies whose primary lines of business are directly associated with the U.S. housing construction market. The index composition encompasses residential builders, suppliers of aggregate, lumber and other construction materials, manufactured housing and mortgage insurers.

Note: the index underwent a significant rebalancing in January of 2006.


What to Expect Going Forward?

• The Good: The recovery continues, and is very strong in some (higher-income) markets.

• The Bad: Remains very uneven, sluggish GDP and income growth, and slow declines in unemployment unemployment. And: rising interest rates while credit still remains relatively tight credit.

• The Uncertain: When will true, widespread recovery take hold? And, what about local policy?

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