The latest numbers make 2017 the best year since the recession.
February 26, 2018: Ever since the last recession, the recovery of Philadelphia’s condo market has generally been both unbalanced and uneven. But, throughout 2017, it seems to have become more steady and uniform. Here’s the latest numbers, courtesy of Allan Domb Real Estate:
- The average price of Philadelphia’s condos increase by 1.8% on a quality- and seasonally-adjusted basis in Q4. This is an acceleration from 0.9% in the previous period. By contrast, Philadelphia house prices actually declined by 0.5% in Q4.
- With the latest quarterly numbers, condo price levels posted their biggest annual gain since the recession. Currently, average condo prices are 8.1% higher than they were one year ago. This is the largest YoY gain since 2006, right before prices began their decline.
- Median condo prices are also up from a year ago. Currently, the median condo price in Philadelphia is $315,000, which is up from $301,000 in the same period last year.
- Price appreciation was positive across almost all neighborhoods in Q4. From smallest to largest, the average rate of condo price appreciation in Q4 by submarket was: West Philadelphia (-16.7%), Northeast Philadelphia (-0.8%), Avenue of the Arts (+0.1%), Rittenhouse Square (+1.1%), North Philadelphia (+1.4%), Northern Liberties/Fishtown/Kensington (+2.2%), South Philadelphia (+2.2%), Art Museum/Fairmount/Brewerytown (+3.5%), University City (+3.9%), Old City (+4.3%), Northwest Philadelphia (+5.8%), Washington Square (+6.5%) and Other Center City (+7.5%).
- Condo price appreciation has become much more geographically widespread. In every quarter of 2017, at least 10 of the 13 condo submarkets in Philadelphia experienced positive price appreciation. The last year that this occurred was in 2005.
- Condo sales volume also continues to run strong. 611 condo units transacted under arms-length conditions in Q4; up 31% in the same quarter one year ago. This was the highest volume in any Q4 since 2007. Total condo transactions in 2017 was 2,334 units; up 15.5% from total transactions in 2016.
- Million-dollar sales continue to break records. There were 43 condo sales at prices of $1m or more in Q4. This was up from 32 in the previous quarter, and up from 28 in the same quarter one year ago. Philadelphia experienced a total of 146 $1m condo sales in 2017, shattering the previous record of 122 such sales at the peak of the previous boom in 2007.
- Million-dollar sales aren’t just for Center City anymore. The neighborhoods of Bella Vista and Chestnut Hill both had condo transactions in excess of $1m in Q4. This is the first time such high-priced sales occurred so far from Center City.
- The pace of sales has also significantly quickened. Currently, the average amount of time it takes a listed condo unit to sell in Philadelphia is 49 days. This is down dramatically from 84 days one year ago.
- Inventories remain problematically tight. The number of condos listed for sale in Philadelphia currently stands at 581 units. This is down significantly from 791 just a few months ago, and is the first time it has fallen below 600 since 2004. Such low—and still falling—supply is at least one factor in explaining the recent acceleration in general price growth.
One significant positive outcome of the condo market’s acceleration is that many condo owners who purchased during the previous boom are no longer in a negative equity position. As recently as a year ago, condo prices in almost every submarket in Philadelphia—with the notable exceptions of the premier neighborhoods of Rittenhouse Square and Washington Square—were still below their pre-bust (i.e. 2007) levels. Hence, many owners who bought prior to then not only had taken a loss on their investment, but also likely owed more mortgage debt on their condo than what they could sell it for. But recently, condo price levels in the neighborhoods of South Philadelphia and Avenue of the Arts have now moved back into positive territory, thus erasing the losses inflicted by the last recession. And, the neighborhoods of Old City, the Art Museum, Fairmount and Brewerytown are very close to being added to this list, and will likely do so in 2018. Hopefully, this will also motivate many would-be sellers to list their unit for sale, thus providing some relief to the inventory shortage.
More broadly, the recent heating up of Philadelphia’s condo market stands in contrast to where other real estate markets are in the current cycle. Right now, the local rental market is in a contractionary phase: rent levels are down from a year ago as much of the recently built supply struggles to be absorbed. At the other extreme, single-family housing remains red hot: current prices and sales are both up 12.7% and 37%, respectively, from one year ago. However, the housing market’s current expansion is now several years old, and is likely much closer to its next peak than it is from its previous trough. Whether it is now the condo market’s turn to step into the spotlight will likely be revealed as 2018 unfolds.
Said Allan Domb, principal of Allan Domb Real Estate, “The data in this report is consistent with what we are seeing in the market—babyboomers and millennials continue to be the two biggest groups moving into The City, with millennials for the first time now buying more than they are renting. Condo inventory is the lowest it has been since 2004, with 581 units currently listed, down from 791 units a few months ago. The low inventory and increasing demand is driving sale prices up which should ultimately help the weakest part of the market, the excess supply of small rental units.”
Email for Kevin Gillen: Gillen@AllanDomb.com
