PHILADELPHIA HOUSE PRICE INDICES

PHILADELPHIA HOUSE PRICE INDICES April 14, 2014 KEVIN C. GILLEN, Ph.D. gillenk@upenn.edu 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. 2014, Fels Institute of Government, All Rights Reserved.

600.0 550.0 500.0 House Price Indices 1980-2014: 1980Q1=100 Philadelphia County v. Philadelphia MSA and U.S. Average Phila. County* Phila. MSA** U.S. Avg.** 450.0 400.0 350.0 300.0 250.0 200.0 150.0 100.0 Q1 * Empirically estimated by Kevin C. Gillen, PhD **Courtesy of the Federal Housing Finance Agency (FHFA). HPIs are available through 2013Q4 only. MSA =Metropolitan Statistical Area, which is the entire 9-county region.

Total House Price Appreciation Rates by Geographic Market Period Philadelphia County* Philadelphia MSA** U.S.A.** 34-Year 132.3% 167.1% 123.4% 10-Year 21.7% 34.3% 13.8% 1-Year -4.1% 3.0% 7.4% 1-Quarter -4.0% -0.4% 1.2% *Empirically estimated by Kevin C. Gillen Ph.D. **Source: U.S. Federal Housing Finance Agency (FHFA). These numbers are through 2013Q4 only. MSA = Metropolitan Statistical Area, which is the entire 10-county region.

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 390.0 House Price Appreciation 1987-2014: Philadelphia v. 10-City Composite 340.0 10-City Composite* Philadelphia 290.0 % Change 10-City Philadelphia 1998 to Peak: +173% +135% From Peak: -20% -19% 240.0 190.0 140.0 90.0 *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.

700.0 Philadelphia House Price Indices by Neighborhood: 1980-2014 1980Q1=100 600.0 500.0 400.0 CtrCity/Fairmount Kensington/Frankford Lower NE Phila. North Phila. NW Phila. South Phila. Univ. City Upper NE Phila. West Phila. 300.0 200.0 100.0 Q1 * All indices empirically estimated by Kevin C. Gillen, Ph.D.

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. 34-year 165.1% 148.1% 118.7% 141.1% 166.4% 185.6% 175.3% 157.4% 136.7% 10-year 25.4% 36.4% 20.3% 28.4% 19.2% 56.3% 15.9% 24.4% 25.2% 1-Year 8.0% 2.7% -5.3% -5.6% -0.9% 0.3% 2.9% -4.5% -17.1% 1-Quarter 6.8% -6.1% -5.7% -12.9% -2.2% 2.5% 2.7% -5.9% -17.5% This table gives the total % change in house prices by neighborhood, through 2014 Q1, from different starting points in time.

Philadelphia Submarket Boundaries

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Median Philadelphia House Price v. Indexed Philadelphia House Price 1980-2014 $140,000 $120,000 Median Price $100,000 Indexed Price* $80,000 $60,000 $40,000 $20,000 Q1 $0 * Empirically estimated by Kevin C. Gillen, PhD

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $45,000 Average House Price Minus Median House Price: 1980-2014 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0

8,000 Number of Philadelphia House Sales* per Quarter: 1980-2014 7,000 6,000 Q1 Q2 Q3 Q4 5,000 4,000 Qtly. Average 3,000 2,000 1,000 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 *Only arms-length transactions between private sector entities were included in these numbers.

30 Number of Philadelphia Home Sales* per Quarter with Price>=$1 Million: 1997-2014 Q1 25 Q2 20 Q3 Q4 15 10 Qtly. Average 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 *Only arms-length transactions between private sector entities were included in these numbers.

Philadelphia House Sales in 2014 Q1

Center City House Sales in 2014 Q1

South Philadelphia House Sales in 2014 Q1

Kensington/Frankford House Sales in 2014 Q1

West Philadelphia House Sales in 2014 Q1

North Philadelphia House Sales in 2014 Q1

Northwest Philadelphia House Sales in 2014 Q1

Northeast Philadelphia House Sales in 2014 Q1

2014 Q1 House Price Rate of Change by Neighborhood Upper NE Phila: -5.9% North Phila: -12.9% NW Phila: -2.2% Univ. City: +2.7% Lower NE Phila: -5.7% Kensington/Frankford: -6.1% West Phila: -17.5% Center City/Fairmount: +6.8% South Phila: +2.5% Note: Each neighborhood is extruded by its average change in house values during 2014 Q1 in order to reflect its growth (or depreciation) rate relative to other neighborhoods.

+$1 Million Dollar House Sales in 2014 Q1 Address Price Price/SqFt 7 306 EMLEN ST $1,025,000 $125.00 32 SUMMIT ST $1,145,000 $17 1.00 2000 MOUNT VERNON ST $1,025,000 $246.10 1822 SPRUCE ST $1,850,000 $251.46 316 S 10TH ST $1,37 9,000 $301.88 316 ST JAMES PL $1,100,000 $315.37 226 GASKILL ST $1,040,000 $361.11 233 GASKILL ST $1,120,000 $388.89 1116 BAINBRIDGE ST $1,050,000 $406.98 2136 RACE ST $1,7 7 5,000 $408.89 251 S 03RD ST $1,100,000 $436.51 2221 LOCUST ST $1,367,000 $446.7 3 1810 DELANCEY PL $2,47 5,000 $507.59 609 S 9TH ST $1,050,000 $514.7 1 217 CATHARINE ST $1,000,000 $544.66 1813 WY LIE ST $1,050,000 $7 11.38

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 HPI: 1980Q1=100 500.0 450.0 Philadelphia HPI Diffusion Index Philadelphia House Price Diffusion Index 200% 150% 400.0 350.0 100% 300.0 50% 250.0 0% 200.0-50% 150.0 100.0 50.0 0.0 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% -200%

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 HPI: 1980Q1=100 Philadelphia House Prices: Declines v. House Price Index 500.0 100% Pct. Declining 450.0 Philadelphia HPI 90% 400.0 350.0 300.0 250.0 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 1980-2014. 80% 70% 60% 50% % Declining 200.0 40% 150.0 30% 100.0 20% 50.0 10% 0.0 0%

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Philadelphia Housing Affordability* Index: 1980-2014 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 *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 gillenk@upenn.edu for details.

15.0 Average House Price-to-Rent Ratios*: 1980-2014 Philadelphia v. U.S. 14.0 13.0 12.0 U.S. Philadelphia 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 *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.

200.0 Inflation-Adjusted* Philadelphia House Price Index 1980-2014 1980Q1=100 180.0 160.0 140.0 120.0 100.0 80.0 Linear Trendline 60.0 40.0 20.0 0.0 *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. Source: US Bureau of Labor Statistics

# 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% %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

# of Days 100 Average Days-on-Market* for Philadelphia Homes 90 80 70 60 50 40 *Days-on-Market (DOM) is the average number of days it takes for a listed house to sell. 30 Source: Trend MLS

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 90 Index of Homebuilder Sentiment: 1985-2014 (Seasonally Adjusted) 80 National Northeast 70 60 50 40 30 20 10 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

2002 2002 2003 2003 2003 2003 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 Philadelphia Stock Exchange Housing Sector Index: 2002-2014 $300 $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 2006. $0 Source: finance.yahoo.com

Housing's Road to Recovery: %Lost v. %Recovered 10% 0% -10% -20% 1% 0% -8% -16% -19% -12% -1% -19% -9% -11% -13% -16% -17% -20% -18% -20% -8% -7% -18% -16% -15% -27% -17% -22% -22% -18% -35% -26% -36% -36% -45% -30% %Remaining -18% -12% -22% -20% -20% -28% -40% %Recovered -13% -23% -50% -60% 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 only 1%, which implies they need to rise another 19% in order to return to their pre-bust peak levels. Source: Kevin C. Gillen, PhD. All other cities courtesy S&P/Case-Shiller. -15% -19% -17% -70%

3.0% February 2014 February 2015 Zillow is forecasting Philadelphia house prices to rise an average of 1.3% from February 2014 to February 2015, while forecasting an average increase of 3% for all major U.S. metro areas during the same period. Source: http://www.zillow.com/research/home-value-forecast-january-2015-6341/