Sales rebound to pre-pandemic levels, but price recovery remains uneven.
March 19, 2021: 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 0.4% on a quality- and seasonally-adjusted basis in Q3. This continues the condo market’s post-pandemic trend of downward—but small—price adjustments. In Q2, during the pandemic’s peak, prices declined by an average of 0.2%, and during Q3, prices fell by an average of 0.5%.
• Compared to one year ago, Philadelphia’s condo prices are currently down an average of 0.6%. But, this is a significant deceleration over the previous quarter’s YoY price decline of 2.3%.
• Philadelphia’s condo prices were significantly outpaced by its house prices in 2020. While the city’s general level of condo prices fell by 0.6% over the course of last year, the general level of its house prices rose by 12.8% during the same period. The latter number represents a significant gain for house prices, which historically appreciate by an average of just 4-5% per year.
• Philadelphia’s condo price appreciation continues to generally lag behind those of other major U.S. cities. Over the course of 2020, San Francisco was the only large city that experienced a worse rate of condo price appreciation (-1.8%) than Philadelphia (-0.6%). By contrast, over the same period, condo prices have changed by an average of -0.1%, 4.6%, 4.9% and 5.1%, respectively, in the cities of New York, Chicago, Los Angeles, and Boston1.
• In a switch from traditional historical pattern, the city’s outer neighborhoods generally appreciated by more than its central ones. From smallest to largest, the average price appreciation in 2020 by submarket was: North Philadelphia (-20.6%), West Philadelphia (-10.4%), Other Center City (-1.3%), South Philadelphia (-0.4%), Art Museum/Fairmount/Brewerytown (-0.1%), Avenue of the Arts (+0.4%), Old City (+0.7%), Northern Liberties/Fishtown/Kensington (+4.1%), Washington Square (+7.3%), Rittenhouse Square (+12.3%), Northeast Philadelphia (+14.3%), University City (+18.8%) and Northwest Philadelphia (+29.0%).
• After dropping sharply in early 2020, overall condo sales have strongly rebounded. The combination of the pandemic and subsequent quarantine saw condo sales plunge 47% in the first half of 2020. But, by Q3, Philadelphia condo sales rose from 333 units to 485 units. In Q4, sales increased again to 596 units, which is 15% higher than the 520 sales that occurred in the same quarter last year.
• But, luxury condo sales continue to struggle to recover. There were just 21 sales of condo units at a price of $1m or more in Q4. Although this is up from 8 such sales that occurred in the previous quarter, it is still well below the levels of the pre-2020 years, which typically saw an average of
30- 40 (and sometimes more) +$1m sales per quarter.
• Unlike single-family homes, condo inventories are not unusually low. There is currently a 7.3 months’ supply of condos listed for sale in Philadelphia, compared to 2.2 months’ supply of houses. The industry typically considers 5-7 months to be representative of a “balanced” market.
Although Philadelphia’s condo prices have struggled compared to its house prices during the current post-pandemic recovery, it should be noted that this pattern is currently typical across most parts of the country. House price growth has generally exceeded condo price growth, while housing inventories remain exceptionally low compared to condo inventories. A pandemic-driven change in consumer demand towards housing product with lower density and more outdoor space (e.g. porches and yards) combined with a simultaneous reduction in the supply of this product has resulted in much greater upwards pressure on house prices relative to condo prices.
Said Allan Domb, of Allan Domb Real Estate, “This has been a tough year for the multi-family high rise market and specifically condominiums. But I see a light at the end of the tunnel, much of which is driven by the vaccine. Condo sales are rebounding, we are getting more calls each day from buyers looking for condos, the city is booming with activity, kids are back in school, office buildings are reopening and many of the cultural institutions that make up the city lifestyle are coming back. I think there is tremendous opportunity in the condo market for those who are able to jump in.”
Email for Kevin Gillen: Gillen@AllanDomb.com