Posted in Philadelphia - Market | Posted on 05-20-2015 | Written by Metrostudy News
- 1Q15 New Home Starts in the Philadelphia region are down 11.6% YoY; starts in the Philadelphia MSA are down 21.7% YoY.
- New subdivisions that became active in the past year are moving at a exceptionally faster pace than old legacy subdivisions
- Overall, the region is capped by the limited supply of high valued land while also being constrained by limited lot availability in job center markets
May 2015 – Metrostudy’s survey of the Philadelphia region’s housing market shows that there were 1,978 home starts in 1Q15, down 10.6% from 4Q14 and a 11.6% decline from 1Q14. The annual starts pace ending 1Q15 stands at 9,667, a decrease of 2.6%. Closings or move-in’s saw a larger drop off of 25.7% quarter to quarter and year over year had an 11% decrease. The annual closings pace for the 1st Quarter of 2015 was 9,792 a 2.3% decrease off of the pace for 4Q14.
The Philadelphia MSA had 963 starts for 1Q15 which is down 15.8% from 4Q14. Year over year starts dropped 21.7%. Annual pace of starts came in at 4,800. That was a 5.2% decrease off of the pace last quarter. Closings for the MSA came in at 908 which is a 33% drop off of last quarter. Looking at the numbers year over year showed a decrease of 21.6%. Annual closings came in at 4,909 for 1Q15 versus the 5,160 pace last quarter which represents a 4.8% drop in pace.
“Analyzing the numbers looks like there was a big drop off in activity, but it is more about the amount of active subdivisions in the market,” said Quita Syhapanya, Director of Metrostudy’s Philadelphia market. “There were 581 active subdivisions in 1Q14 versus 501 for 1Q15. Overall the region is capped by the limited amount of supply of high valued land while also being constrained by the limited amount of finished lots that are currently available. The volume and activity can only gain momentum when the supply opens up to feed the demand. The housing market is catering towards the move up buyers only with first timers still figuring out their finances for rent versus buy. New subdivisions that became active in the past year are moving at a faster pace than old legacy subdivisions.”
The median closing price for a new home in the Philadelphia region was $337,300 an uptick of .3% quarter to quarter. Year over year change was a 3.9% increase for the 1st Quarter of 2015 over the same period last year. The median closings price for a single family home ended the 1st Quarter at $356,200. It was a small fraction of a decrease from the prior quarter. Year over year the price for a single family home increased 4.8%. Price increases the past three years for the 1st Quarter have slowed down.
In 1Q15, there were 22,548 Vacant Developed Lots (VDL) in the Philadelphia Region. Finished lots decreased by 1.3% quarter to quarter. Year over year vacant developed increased by 4.5%. The region’s vacant developed lot months of supply increased to 28 months from 27.6 the prior quarter. A healthy market supply level for equilibrium would be between 24 to 30 months.
In the Philadelphia MSA there are only 7,998 finished lots available in the market. There is 20 months’ worth of finished lots. Months of supply increased from the 19.6 months from the prior quarter due to the slight slow down in pace of annual starts. The Philadelphia MSA continues to be in short supply of available finished lots.
“Most of the new home construction occurring in Philadelphia is happening in and around the city with luxury townhomes replacing old existing row homes,” said Syhapanya. “Condos are making a big comeback in the city of Philadelphia as well. Philadelphia County only has 8.3 months of supply. Montgomery County which is an in demand market with good schools only has 15.1 months of supply. Chester and Bucks counties are both still less than 20 months of supply for finished lots with 19.8 months for both counties.”
The Philadelphia region can be broken up into three distinct markets. We have the Philadelphia Metro, South Jersey market, and Delaware market. Within each market there are submarket and specific communities that carry most of the market when it comes to activity.
The South Jersey market has various dynamics that have slowed progress in housing. There are some positive economic initiatives that could help spur further economic growth which could bring jobs and home buying activity that follows the jobs in the future. The backlog of foreclosures has most likely peaked in September of 2014 and there is light at the end of the tunnel as South Jersey works to get to a normalized housing cycle.
The state of Delaware is having a renaissance of sorts in parts of Sussex County east towards the shore and in submarkets within New Castle County. There are many advantageous of living in Delaware, including no personal property taxes, no sales tax, and social security benefits are not taxed which is a big draw for the active adult group. The new home construction numbers bear that out with the pace of starts and closings for Delaware out pacing the rest of the region. The annual pace for starts is at 3,609 and closings at 3,673. The closings pace has risen the past 3 quarters and increased 3% for 1Q15 versus the pace to end the last quarter of 2014.
The five county Philadelphia Metro has seen solid activity across all the counties. When looking at the numbers single family new home housing inventory sits at 6.7 months of supply and only 17.6 months of supply for vacant developed lots (finished lots) in the market. The Townhome/Duplex product type has been driving activity in the Philly metro area. To close out 1Q15 Townhomes/Duplex started 1,561 homes and closed 1,450 on a rolling 4 quarters. Looking at starts year over year they are up 4%. The Philadelphia Metro is under supplied across the board and even more so around prime locations with easy access to job centers.
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