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to promote civic engagement in the Philadelphia region.Housing values in Philly holding up waaay better than other cities
Tuesday, March 17th, 2009 at 1:23 pm - by Dan Pohlig. Filed under: Planning.
If your consumption of news is limited to cable news networks and national broadcasts, you probably think that the whole country is crashing down in flames around us. And, in certain parts of the country, well… that’s exactly what’s going on.
But cheer up! As Urban Direction’s Greg Heller points out, Philadelphia isn’t doing as bad as other parts of the country when it comes to real estate value. With numbers released by the Center City District, Heller tells us that “home prices in Philadelphia declined only 10.1% since 2006.”
That might seem bad, until you see:
…declines of 11.9% in New York, 12.8% in Boston, 13.7% in Chicago, 32.2% in Los Angeles, 38.3% in Miami, 39.3% in Las Vegas, and 40.6% in Phoenix.
Yep.
Declines of 38.3 percent in Miami… (what’s the opposite of “Bienvendido a Miami?”)
39.3 percent in Vegas… (what gets built in Vegas, stays unsold in Vegas)
and 40.6 percent in Phoenix… (um… how do you like being fifth largest, now?!)
So just like in past economic downturns, Philadelphia is spared the worst for the most part because it was “spared” the dizzying highs of the boom times. Notice that among the city’s listed, the ones with the smallest losses in housing values are the ones with some measure of density, walkability and a well developed transit system. As the economy gets back to normal, leading to a rapid increase in energy prices, the city’s that are prepared to offer people a relatively compact, car-free lifestyle will be poised to recapture housing values the fastest (and most sustainably).
In the 90s, moving back to the city, whether it was New York or Chicago, was made “cool” by pop culture in shows like Friends, Seinfeld, and Sex and The City. Immigration also accounted for a large part of the increase that many of these cities saw after decades of population loss.
Philadelphia was unprepared to play up its own “cool” factor and didn’t exactly roll out the official welcome mat for new Americans. But with financial factors likely to play into the next wave of migration to large cities, Philadelphia would actually have to make an effort not to capture some of this wave.
Will our city be ready?
(Heller also includes the percentage change of housing values in Center City, the densest, most walkable and accessible part of the region. Click through to see the number and realize why Philadelphia could be ready for something big on the flip side of this crisis.)
March 18th, 2009 at 1:56 pm
Well, sorta.
Boom and bust cycles pass Philadelphia by for many reasons: taxes, bad schools, lack of future visioning. As Dan Pohlig notes, being spared the bust, because we were spared the boom is turning lemons into lemonade, but it lays bare some stark realities:
The Sun Belt cities overbuilt, because the money was free and the land was cheap. It’s a story at least as old as the Florida land crash that preceded the 1929 crash. Much of that Sun Belt development was built on spec. It was foolish, and they will pay for at least half a decade.
That doesn’t happen in Philadelphia because the builders and speculators don’t see Philly as a place to throw up a building, especially working to middle class housing. The exception: the 10-year tax abatments which mostly went to condos and flips, because there was so much credit around, that an abated property could be capitalized into a ridiculously high asking price that was often met by the buyer who had more credit than sense. we’re lucky the mania was limited to Center City.
Philadelphia is geographically blessed. It’s in the middle of Megalopolis. It should be hotter than most places.
It’s an illusion that because Center City can get high prices for some condos, therefore the neighborhoods are healthy. They are still losing population, mostly families who leave if they can. Our focus has to move from the glitz to the grit of, say, Port Richmond. We need to repopulate those type of neighborhoods.
Overall, real estate is cheap here, and its because of lack of demand. People wanted to be in Vegas or Phoenix and paid too much for the privilege because they wanted to be there. We should aspire to that, minus the corrosive credit-driven boom and bust cycle.
From a colleague of mine in Britain: http://www.youtube.com/watch?v=1nttuh8oHYw
March 23rd, 2009 at 1:56 pm
Both Pohlig and Vincent are on point in terms of the current housing market in Philadelphia. Is our housing glass “half-full or half-empty”? We do have more affordable housing in the city and across the metropolitan area, especially compared to boom towns in the Sun Belt, and these lower housing prices are largely the result of the lower socioeconomic profile shared by many communities. The Metropolitan Philadelphia Indicators Project has been documenting the changing housing market in Philadelphia for the past 6 years, and has data available on average mortgage amounts for all the communities in the Philadelphia region from 2000 through 2007. (These are available on MPIP’s website.http://mpip.temple.edu/mpip, where people can develop on-line maps and graphics, using our MetroPhilaMapper utility MetroPhilaMapper. )
Comparing Philadelphia to 8 other metropolitan areas shows that our housing prices routinely lag those in Boston, Chicago, Minneapolis, and Phoenix (each having a more prosperous economic trajectory over the past decade). To bolster Vincent’s argument (but an indication that many cities fare worse than Philadelphia), metropolitan areas such as Cleveland, Detroit, and Pittsburgh tend to have lower priced housing. But higher housing prices have implications for whether people can afford these homes. In last year’s release of Where We Stand: Community Indicators for Metropolitan Philadelphia, 2008 we compared the median housing prices to the median income levels for nine metropolitan areas and found that Philadelphia had a price to income ratio of roughly 3.5:1, while Boston’s was greater than 5:1, indicating that on average, the households of our region find it a more affordable housing market.
In a report that we issued last fall (Subprime Lending in the Philadelphia Metropolitan Region), we also noted that Philadelphia’s subprime mortgage market was quite active, and posed a wide spread risk of foreclosure across many communities in the region that are not usually thought of in terms of risky housing markets, especially in South Jersey. Like many of the declining cities mentioned on Pohlig’s comment, many of these are likely overbuilt, or are facing the issue of simultaneously declining household incomes and housing values. Put simply, Philadelphia is not immune to the larger economic and housing market forces at work, but for now appears to be doing better than many areas.