Mar 02, 2015

Housing Trends

Philadelphia Housing Market Making Progress

Following a quarter in which both sales and house price increases became more widespread across Philadelphia’s neighborhoods, the latest data from Q4 2014 indicate that this positive development has continued this past quarter. Meyers Research’s Chief Economist, Kevin Gillen, Ph.D. shares highlights from a newly published quarterly report on the City of Philadelphia housing market made in collaboration with Drexel’s Lindy Institute and Meyer’s Research. Find  the full report with a presentation here.

The average house value in Philadelphia increased by 0.8% in Q4 on a quality- and seasonally-adjusted basis, according to the latest data from the City’s Recorder of Deeds. This modest appreciation is a slight decrease from Q3, but is primarily due to increased home sales in lower-priced parts of the City. By contrast, since hitting bottom two years ago, Philadelphia housing’s recovery had been largely confined to the higher-income and higher-priced areas of the City. Consequently, the slowdown in Citywide price appreciation due to more sales in low-priced neighborhoods can be interpreted as the housing recovery becoming more widespread and equitable across Philadelphia’s many neighborhoods.

Prices fell this quarter in the City’s highest-priced neighborhoods of Center City/Fairmount and Northwest Philadelphia (which includes the relatively affluent enclaves of East Falls, Mount Airy and Chestnut Hill) as well as in the revitalizing neighborhoods of South Philadelphia and University City, but price appreciation was strongest in the low-income neighborhoods of North Philadelphia, Kensington/Frankford and West Philadelphia. Moreover, this is the first time that these neighborhoods have seen two consecutive quarters of price appreciation since Philadelphia’s house prices hit bottom in the winter of 2012.

Sales activity also continued to be strong. This quarter, 3,710 homes changed hands under arms-length conditions. This is a nearly 11% increase over the same quarter one year ago, and marks the strongest fourth quarter of sales activity in five years. As such, it appears that home sales levels have returned to being close to their historic quarterly average of approximately 3,800 transactions.

Philadelphia’s leading indicators for housing continue to give reasons for optimism. Housing inventories (the number of homes listed for sale) also continued to decline this quarter, and are very close to being back to their historic pre-bubble average of 6,ooo. And, financial markets continue to be more optimistic, too. The Philadelphia Housing Sector Index, which is a composite index of publicly traded stock for firms in the housing sector, hit a new post-bubble high of $218 per share. The index hit an all-time low of $52 per share in 2009 after falling from a peak of nearly $290 per share back in the boom year of 2005.

Kevin Gillen, Ph.D., Chief Economist
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