After an aggressive 2017, prices pause at the beginning of 2018.
May 23, 2018: After its best year since the recession, Philadelphia’s condo market decided to follow the local housing market’s lead and show some variegated indicators in the first quarter of 2018. Here’s the latest numbers, courtesy of Allan Domb Real Estate:
- The average price of Philadelphia’s condos fell by 0.2% on a quality- and seasonally-adjusted basis in Q1. This would be considered a statistically negligible amount by most economists and industry analysts. By contrast, Philadelphia house prices fell by 1.6% during the same period.
- Median condo prices also declined in Q1. Currently, the median condo price in Philadelphia is $300,000, which is down 4.9% from $315,000 in the previous quarter. The reason that the decline in the median price is so much larger than the decline in the (regression-based) average price is because the regression which computes the condo price index controls for seasonal fluctuations in prices. Hence, this suggests that the majority of the decline in condo prices in Q1 is of a seasonal—and therefore, temporary—nature.
- Even with the latest deceleration, Philadelphia condo prices remain higher than they were one year ago, and are still outpacing house prices. Currently, average condo prices are 6.2% higher than they were one year ago, while average house prices are up by a more restrained 4.3% over the same period.
- Price changes were mixed and mostly modest across most submarkets in Q1. From smallest to largest, the average change in condo prices in Q1 by submarket was: Northwest Philadelphia (-9.7%), University City (-8.7%), North Philadelphia (-3.4%), Old City (-2.7%), Other Center City (-2.0%), Avenue of the Arts (-1.2%), Washington Square (-0.4%), Northeast Philadelphia (-0.1%), Rittenhouse Square (+0.1%), Art Museum/Fairmount/Brewerytown (+0.2%), Northern Liberties/Fishtown/Kensington (+0.4%), South Philadelphia (+2.8%), and West Philadelphia (+3.0%),
- Condo price changes became much less uniform in Q1. In every quarter of 2017, at least 10 of the 13 condo submarkets in Philadelphia experienced positive price appreciation. In Q1, only 5 submarkets experienced positive price appreciation.
- Condo sales volume continues to remain robust, and also continue to trend upwards. 470 condo units transacted under arms-length conditions in Q1; up 13.5% in the same quarter one year ago[1]. This was the highest volume in any Q1 since 2007.
- Million-dollar sales continue to break records. There were 36 condo sales at prices of $1m or more in Q1. This was a whopping 80% increase from 20 sales in Q1 of last year. It was also the best all-time Q1 of +$1m sales in the city’s history, breaking the previous record of 28 such sales set back in 2006 Q1.
- Inventories remain problematically tight. The number of condos listed for sale in Philadelphia currently stands at approximately 600 units. This is down substantially from 775 listings one year ago, and is also very close to an all-time low.
Flat prices, strong sales and tight inventories are an unusual combination in real estate markets. But this anaomaly is not confined to the city’s condo market. As this author has noted in other, recent reports, both the city’s and suburb’s markets for single-family houses are also experiencing this phenomenon. However, in contrast to the market for houses, the city’s condo market is still in the early stages of its current expansionary cycle, whereas the housing market’s current boom is in its sixth year. As such, there is a strong incentive to attribute the most recent mixed numbers to being an outlying seasonal blip, rather than a fundamental change in the market’s overall direction.
Said Allan Domb, principal of Allan Domb Real Estate: “Despite the market showing some mixed signals, one thing is clear—people today desire an urban lifestyle. There is currently an oversupply of smaller units geared towards millennials that I am optimistic will get absorbed due to job growth over the next couple of years. And hopefully the shortage of large units that appeal to baby boomers will lead to further development and rehabbing to create the product they desire.”
Email for Kevin Gillen: Gillen@AllanDomb.com
[1] Since property transactions in this region tend to be highly seasonal, it is more commonplace to compare transactions volume in a given period to the same period one year ago (when the same seasonal conditions prevailed) rather to the immediately preceding period.
