State of the Philadelphia Housing Market

Transcription

1 State of the Philadelphia Housing Market September 17, 2014 KEVIN C. GILLEN, Ph.D. 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.

2 Recovery is here, but uneven and sluggish House Price Indices : 1980Q1=100 Philadelphia County v. Philadelphia MSA and U.S. Average 7% increase after 20% decline Phila. County* Phila. MSA** U.S. Avg.** Q2

3 Our recovery lags most other cities: House Price Appreciation : Philadelphia v. 10-City Composite City Composite* Philadelphia % Change 10-City Philadelphia 1998 to Peak: +173% +136% From Peak: -19% -13%

4 Philadelphia got off rather easy during the downturn: Housing's Road to Recovery: %Lost v. %Recovered 20% 10% 11% 10% 0% -10% -20% -20% -17% -3% -7% -13% -14% -6% -22% -10% -8% -14% -19% -21% -21% -18% -21% -16% -26% -23% -24% -36% -16% -26% -18% -21% -19% -30% -40% -50% -60% -70% %Remaining %Recovered -9% -12% -16% -17% -23% -13% -18% -19% 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. -11% -32% -23% -34% -35% -42%

5 8,000 7,000 6,000 5,000 Q1 Q2 Q3 Q4 Number of Philadelphia House Sales* per Quarter: % decline from peak, but are now trending up. 4,000 Qtly. Average 3,000 2,000 1,

6 Million dollar-plus home sales remain strong: 30 Number of Philadelphia Home Sales* per Quarter with Price>=$1 Million: Q1 25 Q2 20 Q3 Q Qtly. Average

7 Recovery skewed towards higher-priced homes: Median Philadelphia House Price v. Indexed Philadelphia House Price $140,000 $120,000 Median Price $100,000 Indexed Price* $80,000 $60,000 $40,000 $20,000 Q2 $0

8 Sales skewed towards higher-priced homes:

9 Note encroachment of higher-priced homes:

10 Rent appreciation skewed as well: Top 10 v. Bottom 10: Changes in Average House Rents by Philadelphia Neighborhood, University City Cedar Park 60% 62% Powelton 49% Bella Vista 46% Fishtown 41% Fairmount-Spring Garden 30% Center City West Queen Village-Pennsport 28% 28% East Passyunk Point Breeze 25% 25% Holmesburg-Torresdale East Oak Lane East Germantown Tacony West Oak Lane Mount Airy 8% 7% 7% 7% 6% 6% Wissinoming Lawncrest Oxford Circle 2% 1% 3% Cedarbrook -4% -10% 0% 10% 20% 30% 40% 50% 60% 70%

11 Rents up significantly, even as house prices down: 120 Philadelphia Rents v. House Prices: Median Rent Median House Price Rents up 16% House Prices down -1.5% 80

12 Price-Rent Ratio at 10-year low 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 gillenk@upenn.edu for further details.

13 Inventories beginning to uptick again? # Homes Listed "For Sale" 14,000 Philadelphia Houses Listed For Sale: Inventory v. Absorption Rate # Houses Listed For Sale % Absorbed 30% 12,000 10,000 8,000 6,000 4,000 2,000 25% 20% 15% 10% 5% %Absorbed = (#Sales/#Listings) 0 0%

14 Homes are moving at a faster pace: # 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

15 Economy still sluggishly recovering:

16 Unemployment slow to decline:

17 Interest rates are heading up again:

18 Homebuilders feeling more optimistic: 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

19 Markets more bullish on housing: $300 Philadelphia Stock Exchange Housing Sector Index: $250 $200 $150 $100 $50 The PHLX Housing Sector Index is a modified capweighted 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 $0

20 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?