PHILADELPHIA HOUSE PRICE INDICES

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PHILADELPHIA HOUSE PRICE INDICES February 13, 2017 KEVIN C. GILLEN, Ph.D. Kevin.C.Gillen@Drexel.

1 PHILADELPHIA HOUSE PRICE INDICES February 13, 2017 KEVIN C. GILLEN, Ph.D. Disclaimers and Acknowledgments: The Lindy Institute for Urban Innovation at Drexel University provides this report free of charge to the public. The report is produced by Kevin C. Gillen Ph.D.. 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. 2016, Drexel University, All Rights Reserved.

2 House Price Indices : 1980Q1=100 Philadelphia County v. Philadelphia MSA and U.S. Average Phila. County* Phila. MSA** U.S. Avg.** Q4 * Empirically estimated by Kevin C. Gillen, Ph.D. **Courtesy of the Federal Housing Finance Agency (FHFA). HPIs are available through 2016Q2 only. MSA =Metropolitan Statistical Area, which is the entire 9-county region.

3 Total House Price Appreciation Rates by Geographic Market Period Philadelphia County* Philadelphia MSA** U.S.A.** 37-Year 162.5% 178.0% 136.9% 10-Year 10.7% 10.8% 5.5% 1-Year 11.6% 8.2% 5.9% 1-Quarter -0.8% 2.7% 1.5% *Empirically estimated by Kevin C. Gillen Ph.D. **Source: U.S. Federal Housing Finance Agency (FHFA). These numbers are through 2016Q3 only. MSA = Metropolitan Statistical Area, which is the entire 10-county region.

4 House Price Appreciation : Philadelphia v. 10-City Composite City Composite* Philadelphia % Change 10-City Philadelphia 1998 to Peak: +172% +137% From Peak: -9% +10% *Source: S&P/Case-Shiller. The 10-City Composite index includes Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, DC. It does not include Philadelphia.

5 YoY House Price Change (%) : Philadelphia v. 10-City Composite 25.0% 20.0% 15.0% 10-City Composite* Philadelphia 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% This chart shows the percent change in the respective house price indices from one year ago, which proxies for the annual average house price appreciation rate in each market % *Source: S&P/Case-Shiller. The 10-City Composite index includes Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, DC. It does not include Philadelphia.

6 CtrCity/Fairmount Philadelphia House Price Indices by Neighborhood: Q1=100 Kensington/Frankford Lower NE Phila. North Phila. NW Phila. South Phila. Univ. City Upper NE Phila. West Phila Q4 * All indices empirically estimated by Kevin C. Gillen, Ph.D.

7 Philadelphia House Price Appreciation Rates by Neighborhood Period Center City/ Fairmount Kensington /Frankford Lower NE Phila. North Phila. NW Phila. South Phila. Univ. City Upper NE Phila. West Phila. 37-year 174.3% 154.3% 142.7% 168.1% 176.1% 207.5% 198.5% 167.1% 169.3% 10-year 8.4% 0.0% -2.7% 3.3% -0.2% 30.9% 27.6% -2.3% 2.5% 1-Year 5.8% 3.0% 11.2% 13.9% 4.7% 8.6% 12.6% 4.3% 5.8% 1-Quarter -2.4% -2.9% 2.3% -2.2% -0.1% 2.4% -5.9% 1.1% -3.0% This table gives the total % change in average house prices by neighborhood, through 2016 Q4, from different starting points in time.

8 Philadelphia Submarket Boundaries

9 $160,000 Median Philadelphia House Price v. Indexed Philadelphia House Price $140,000 $120,000 $100,000 Median Price Indexed Price* $80,000 $60,000 $40,000 $20,000 $0 Q4 * Empirically estimated by Kevin C. Gillen, PhD

10 $45,000 Average House Price Minus Median House Price: $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0

11 8,000 Number of Philadelphia House Sales* per Quarter: ,000 6,000 Q1 Q2 Q3 Q4 5,000 4,000 Qtly. Average 3,000 2,000 1, *Only arms-length transactions between private sector entities were included in these numbers.

12 40 Number of Philadelphia Home Sales* per Quarter with Price>=$1 Million: Q1 Q Q3 Q Qtly. Average *Only arms-length transactions between private sector entities were included in these numbers.

13 Philadelphia House Sales in 2016 Q4

14 Center City House Sales in 2016 Q4

15 South Philadelphia House Sales in 2016 Q4

16 Kensington/Frankford House Sales in 2016 Q4

17 West Philadelphia House Sales in 2016 Q4

18 North Philadelphia House Sales in 2016 Q4

19 Northwest Philadelphia House Sales in 2016 Q4

20 Northeast Philadelphia House Sales in 2016 Q4

2016 Q4 House Price Rate of Change by Neighborhood North Phila: -2.2% NW Phila: -0.1% Upper NE Phila: +1.1% Univ. City: -5.9% Lower NE Phila: +2.3% West Phila: -3.0% Kensington/Frankford: -2.

21 2016 Q4 House Price Rate of Change by Neighborhood North Phila: -2.2% NW Phila: -0.1% Upper NE Phila: +1.1% Univ. City: -5.9% Lower NE Phila: +2.3% West Phila: -3.0% Kensington/Frankford: -2.9% Center City/Fairmount: -2.4% South Phila: +2.4% Note: Each neighborhood is extruded by its average change in house values during 2016 Q4 in order to reflect its growth (or depreciation) rate relative to other neighborhoods.

+$1 Million Dollar House Sales in 2016 Q4 PRICE ADDRESS $1,050,000 2209 SPRUCE ST $1,070,000 342 S 05TH ST $1,080,000 416 SPRUCE ST $1,080,000 1822 N BOUVIER ST $1,125,000 247 PINE ST $1,187,500 7311

22 +$1 Million Dollar House Sales in 2016 Q4 PRICE ADDRESS $1,050, SPRUCE ST $1,070, S 05TH ST $1,080, SPRUCE ST $1,080, N BOUVIER ST $1,125, PINE ST $1,187, ELBOW LN $1,300, E EYRE ST $1,360, KATER ST $1,435, LOMBARD ST $1,450, KATER ST $1,535, DELANCEY ST $1,545, CHESTER AVE $1,650, S 17TH ST $2,200, FITZWATER ST $2,900, PANAMA ST

23 HPI: 1980Q1= Philadelphia HPI Diffusion Index Philadelphia House Price Diffusion Index 200% 150% 100% % % % 50.0 The diffusion index measures how varied the direction of house price changes are across Philadelphia neighborhoods. It is computed as the percent difference between the number of neighborhoods in which prices rose in a given quarter, and the number of neighborhoods in which prices fell. A value of -100% indicates that prices fell in all neighborhoods in a given quarter, while a value of +100% indicates that prices rose in all neighborhoods. A value of 0% indicates that house price changes were evenly split between increases and decreases, across neighborhoods. Diffusion indexes are commonly used in financial economics as a leading indicator of turning points in a market's direction. -100% -150% %

24 HPI: 1980Q1=100 Philadelphia House Prices: Declines v. House Price Index % Pct. Declining Philadelphia HPI 90% This chart compares the Philadelphia House Price Index (in red) to the percent of Philadelphia neighborhoods that experienced house price declines (in blue), in each quarter from % 70% 60% 50% % Declining 40% % % 10% %

25 % 5.00% 4.00% Dispersion Index of Philadelphia Housing The Dispersion Index measures how varied house price changes are across the city's neighborhoods. It is computed as the standard deviation of quarterly house prices changes across submarkets. High values of the index imply large variation in house price changes between different neighborhods, while low values imply that house price changes are relatively the same across the city. High values of the index are often an indicator that the market is reaching a turning point; i.e. a peak or trough. 3.00% 2.00% 1.00% 0.00%

26 Philadelphia Housing Affordability* Index: *Affordability is measured as the ratio of the median Philadelphia house price to the median Philadelphia household income. High values of the index mean that housing has become less affordable to the average Philadelphian. Contact for details.

27 15.0 Average House Price-to-Rent Ratios*: Philadelphia 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 Kevin.C.Gillen@Drexel.edu for further details.

28 Inflation-Adjusted* Philadelphia House Price Index Q1=100 *The empirically estimated house price index is deflated by the rate of inflation over time, using the national Consumer Price Index as the proxy for the national rate of inflation. This procedure converts the house price index from "nominal" to "real" terms, and thus shows house price changes net of general inflation Linear Trendline Source: US Bureau of Labor Statistics

29 # Homes Listed "For Sale" 14,000 Philadelphia Houses Listed For Sale: Inventory v. Absorption Rate # Houses Listed For Sale % Absorbed 35% 12,000 30% 10,000 8,000 6,000 4,000 2,000 25% 20% 15% 10% 5% %Absorbed = (#Sales/#Listings) 0 0% %Absorbed is defined as the percent of homes listed for sale in a given month that also sold in that same month. Source: Trend MLS

30 Months' Supply of Inventory in Philadelphia Months' Supply of Inventory measures how many months it would take to completely burn off the existing inventory of homes currently listed for sale, given their current pace of sales. 5-7 months is considered a normal, balanced market. More than 7 months indicates a Buyer's market, and less than 5 months indicates a Seller's market Buyer's Market Balanced Market Seller's Market 0.0 Source: Trend MLS

31 # of Days 100 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. 30 Source: Trend MLS

32 Index of Homebuilder Sentiment: (Seasonally Adjusted) 80 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. 0 Source: National Assoc. of Homebuilders (NAHB)/Wells Fargo

33 $300 Philadelphia Stock Exchange Housing Sector Index: $250 $200 $150 $100 $50 $0 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. Source: finance.yahoo.com

34 *** # of Units Population 4,500 Building Permits Issued for Construction of Residential Units in Philadelphia: Single-Family v. Multifamily 190,000 4,000 Single-Family* Multifamily** Center City Pop. 185,000 3,500 3, , ,000 2, , ,000 2, ,000 1, ,000 1, , , ,000 *Structures with 1-4 dwelling units **Structures with >=5 dwelling units ***Note: 2016 Numbers are YTD numbers through November Sources: U.S. Census Center City District

35 Philadelphia House Price Index and 1-Year Forecast Philadelphia House Price Index: Actual v. Forecast Phila. County HPI Forecast HPI Zillow.com is currently forecasting Philadelphia house prices to rise an average of 4.0% over the next year, which is a downgrade from its previous forecast of 4.2% made three months ago. It has also downgraded its rating of Philadelphia s market temperature from Very Hot to Warm. Source:

PHILADELPHIA HOUSE PRICE INDICES

PHILADELPHIA HOUSE PRICE INDICES July 20, 2017 KEVIN C. GILLEN, Ph.D. Kevin.C.Gillen@Drexel.edu Disclaimers and Acknowledgments: The Lindy Institute for Urban Innovation at Drexel University provides this