The Single Family
Housing Market
The Philadelphia Single family Housing (“housing”) market demonstrated a linear growth in median prices between 2016 and 2018, rising from $175,000 ($129/SF) to $194,900 ($149/SF). However, after having peaked in 2018-Q2 and registering a solid 16% growth off 2016-Q1, it has been on a downward trajectory ever since.
Of course, the 2019-Q1 does not include the March sales, so it could be an aberration at this point.
Since the housing market in the US is highly seasonal (May through August are considered peak months), the quarter-over-quarter median sales analysis – though the industry standard – could be deceptive. Therefore, the seasonally adjusted quarters like 2016-Q2 ($138/SF) vs. 2017-Q2 ($143/SF) vs. 2018-Q2 ($149/SF) are more comparable in establishing the market trend and, in turn, the time adjustment factors for automated valuation modeling (AVM).
Moreover, the Price per SF (SPSF) is a more meaningful metric for the investors than the traditional Median Sale Price (SP) considering it is normalized, thus ironing out the variations in sizes (in our example, the quarterly Median Living SFs).
When an extended time curve (twelve quarters in this case) is analyzed, the statistically smoothed trendline is a better indicator of the market. For example, the rapid rise in 10-year bond yield in early 2018 forced many buyers sitting on the fence to promptly return to market, spiking the 2018-Q2 prices. The bond yield steadily declined since 2018-Q3, stabilizing the market. The smoothed trendline is therefore more meaningful for the investors as well.
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| (Click on the image to enlarge) |
The Philadelphia Single family Housing (“housing”) market demonstrated a linear growth in median prices between 2016 and 2018, rising from $175,000 ($129/SF) to $194,900 ($149/SF). However, after having peaked in 2018-Q2 and registering a solid 16% growth off 2016-Q1, it has been on a downward trajectory ever since.
Of course, the 2019-Q1 does not include the March sales, so it could be an aberration at this point.
Since the housing market in the US is highly seasonal (May through August are considered peak months), the quarter-over-quarter median sales analysis – though the industry standard – could be deceptive. Therefore, the seasonally adjusted quarters like 2016-Q2 ($138/SF) vs. 2017-Q2 ($143/SF) vs. 2018-Q2 ($149/SF) are more comparable in establishing the market trend and, in turn, the time adjustment factors for automated valuation modeling (AVM).
Moreover, the Price per SF (SPSF) is a more meaningful metric for the investors than the traditional Median Sale Price (SP) considering it is normalized, thus ironing out the variations in sizes (in our example, the quarterly Median Living SFs).
When an extended time curve (twelve quarters in this case) is analyzed, the statistically smoothed trendline is a better indicator of the market. For example, the rapid rise in 10-year bond yield in early 2018 forced many buyers sitting on the fence to promptly return to market, spiking the 2018-Q2 prices. The bond yield steadily declined since 2018-Q3, stabilizing the market. The smoothed trendline is therefore more meaningful for the investors as well.
The Condo Market
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| (Click on the image to enlarge) |
Since the condo market
is often the leading indicator of the local housing market, investors try to
take a little longer term view of the condo market. That is why the yearly performance
of the condo market since the last recession is depicted above.
First off, the condos are significantly pricier than the comparable single family homes. Two reasons contribute to the higher pricing: Age (newer properties – Median Home Age of 1930 vs. Median Code Age of 1970) and the Type (mostly high-rise buildings in expensive locations).
While the Assessor's office lagged in capturing the impact of the recession on the market – Tax Roll Value/SF continued to front-run the market i.e. SP/SF until 2014 – they have been on the defensive since the market peaked in 2016, meaning Assessor values have been significantly trailing the market. Of course, one has to be careful in case of the statutory fractional assessments, requiring value equalization to avoid having to compare apples with oranges.
First off, the condos are significantly pricier than the comparable single family homes. Two reasons contribute to the higher pricing: Age (newer properties – Median Home Age of 1930 vs. Median Code Age of 1970) and the Type (mostly high-rise buildings in expensive locations).
While the Assessor's office lagged in capturing the impact of the recession on the market – Tax Roll Value/SF continued to front-run the market i.e. SP/SF until 2014 – they have been on the defensive since the market peaked in 2016, meaning Assessor values have been significantly trailing the market. Of course, one has to be careful in case of the statutory fractional assessments, requiring value equalization to avoid having to compare apples with oranges.
Needless to say, when the Assessor values front-run the market, they tend to
encourage unnecessary appeals (of course, if that had occurred in this
particular instance is unknown), thus forcing them to be on the defensive the
next time around.
Investors tend to follow the Assessor's actions closely while buying or selling portfolios. Obviously, the prospective sellers become a bit nervous when the tax roll values start to trail the market. Conversely, it makes the potential buyers more aggressive while negotiating.
Again, a longer term perspective is critical in dealing with any condo market.
Investors tend to follow the Assessor's actions closely while buying or selling portfolios. Obviously, the prospective sellers become a bit nervous when the tax roll values start to trail the market. Conversely, it makes the potential buyers more aggressive while negotiating.
Again, a longer term perspective is critical in dealing with any condo market.
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