Philadelphia Housing Inventory Surge Is Hitting An All-Time Low
Prices and sales are hitting new highs, while inventories drop to a record low during the second quarter 2017.
The month of July has been a very interesting one for Philadelphia. For the first time ever, Philly’s housing inventory has hit an all-time low. The numbers for the second quarter have been disclosed and things are not looking so vibrant. There are currently 3,883 houses on the market when the usual number goes beyond the 4,000 mark.
Apparently, the argument (or prediction) that Philly’s real estate market is accelerating at a record-breaking pace is true. “This is the first time that this number has fallen below 4,000 in the history of this data going back to 2001,” Kevin Gillen, senior research fellow at the Lindy Institute for Urban Innovation, writes in his latest second quarter report, “Combining such low supply with the current rapid pace of sales, it would take only 3.1 months to burn off the existing inventory of homes for sale.”
Below is a summary of the Q2 by the Numbers (According to Lindy Institute for Urban Innovation):
- $198K average house price
- $158K median house price
- 48 average days on market
- 9% annual house appreciation rate
- 3,883 homes for sale
If we look closely the above chart, it would take only 3.1 months to burn off the existing inventory of homes for sale. This will occur by combining the low supply with the current rapid pace of sales. For the Q2, the median house price in Philadelphia increased nearly 15% in just the last three months to hit a new high of $158,000. The reports also makes a clear point that by contrast, 5-7 months is considered to be typical of a “normal” or “balanced” market. Such severely restricted supply in an environment where demand continues to grow will almost certainly place significant upward pressure on local house prices.
Now, Philly is not the only city in the US with an inventory problem. The reality is that the country needs to add at least 4.6 million new apartments by 2030 to meet its rising demand. Philly alone will need to add 38,407 new apartments. The challenge arises when structurally speaking, the Philadelphia metro ranks sixth out of 50 metros in terms of hardest cities to add new apartments.
Philadelphia is currently outperforming most other large US cities in house price growth. Prices here are currently appreciating at a rate of 9% per year, whereas the house price index for the top ten largest US cities (excluding Philadelphia) is currently growing at only 4.8% per year.
The recent house price increases are almost completely spread across the entire city. The average change in house prices by neighborhood in Q2 was:
(Image Credit: Curbed Philadelphia).