Prices dropped slightly but sales rebounded strongly.
December 22, 2020: Prices generally showed modest declines, but sales bounced back sharply from their
spring plunge. Here’s the latest numbers, courtesy of Allan Domb Real Estate:
- The general level of Philadelphia’s condo prices fell by 0.5% on a quality- and seasonallyadjusted basis in Q3. This continues the condo market’s post-pandemic trend of downward—but modest—price adjustments. In Q2, during the pandemic’s peak, prices declined by an average of just 0.2%.
- Compared to one year ago, Philadelphia’s condo prices are currently down an average of 2.3%. This is an acceleration over the previous quarter’s YoY price decline of 1.8%.
- Philadelphia’s house prices have continued to outpace its condo prices in 2020. While the general level of condo prices has declined by 2.3% over the last twelve months, the general level of house prices has risen by 8.4%. The latter number represents a significant gain for house prices, which have historically appreciated by an average of just 4-5% per year. A pandemic-driven change in household preferences for lower density and more outdoor space (e.g.. porches and yards) may be behind this shift.
- Philadelphia’s condo price appreciation continues to generally lag behind other major U.S. cities. Over the course of the past year, San Francisco was the only large city to experience a larger decline in average condo prices than Philadelphia (-2.5%). By contrast, over the same period, condo prices have changed by an average of -0.8%, 3.8%, 5.0% and 5.1%, respectively, in the cities of New York, Chicago, Los Angeles, and Boston1 .
- Price levels continue to show significant variation across submarkets, with central locations and newer products commanding significant premiums. From smallest to largest, the median price per square foot of sold condos in Q3 was: West Philadelphia ($102), Northeast Philadelphia ($142), Northwest Philadelphia ($160), University City ($198), North Philadelphia ($261), Art Museum/Fairmount/Brewerytown ($291), Old City ($313), South Philadelphia ($322), Northern Liberties/Fishtown/Kensington ($323), Avenue of the Arts ($366), Washington Square ($376), Other Center City ($384) and Rittenhouse Square ($484).
- After dropping sharply in Q2, sales activity rebounded strongly in Q3. The combination of the pandemic and subsequent quarantine saw condo sales fall by 47% in Q2. But, in Q3, following the relaxation of the quarantine and the re-classification of real estate as an “essential business”, Philadelphia condo sales rose from 333 units to 485 units, a 46% increase. While this is still below the 625 condo transactions that occurred in the same quarter one year ago, it is still well in line with the typical level of condo sales for this time of year.
- Million-dollar condo sales continue to decline. There were just 8 sales of condo units at a price of $1m or more in Q3. This is down from 14 in Q2, which is down from 21 in Q1, which is down from 28 in Q4 of last year. This was the lowest level of +$1m condo sales since 2009, when the local real estate market was still in the trough of the last recession.
Said Allan Domb, principal of Allan Domb Real Estate: “There is concern on multiple fronts for current condo buyers and residents, particularly those in Center City. The pandemic has largely minimized the lifestyle—restaurants, theater, museums, etc.—that motivated these households to live downtown in the first place. And, the combination of the pandemic with the subsequent social unrest has greatly increased their concern for personal safety. Lastly, keep in mind that many buyers were motivated to move into the city so they could walk to work. But now that remote working is widely prevalent, physical proximity to the office is not as critical a factor. However, once the post-covid lifestyle returns, I believe public safety will also improve and we will see a return of these buyers. At the end of the day the key for Philadelphia will be our ability to offer a lifestyle not available in the suburbs.”
Email for Kevin Gillen: Gillen@AllanDomb.com
1 Source: S&P CoreLogic Case-Shiller