Posted in Philadelphia - Market | Posted on 02-19-2015 | Written by Metrostudy News
- YoY Philadelphia Region closings are up 6.8%
- Quarter to quarter the region saw new home starts down 13.5% from 3Q14; while the Philadelphia MSA also saw starts down 14.6% from 3Q14
- The median price of a single family home stood at $360k in 4Q14, up 3.9% YoY
- The entire region is facing a shortage in Lot Supply that will play out differently from county to county
February 2015: Metrostudy’s survey of the Philadelphia region’s housing market shows that 4Q14 starts totaled 2,336, down 13.5% from 3Q14. The Philadelphia region recorded 2,643 observed closings for 4Q14, down 8% from 3Q14. The Philadelphia MSA had 1,393 closings in 4Q14, a decrease of 13.7% from 3Q14. Year over year closings are up 17%. Starts decreased for the MSA to 1,219 which was a 14.6% dip from 3Q14. Year over year saw a 9.9% increase in new home starts.
Annual starts pace for the region saw a very minimal decrease of .1% to 10,127 from 3Q14. The pace for the region for annual starts shows some stability in the region considering the 4th Quarter is typically a slower time for home building. The main counties driving activity for the entire region can be attributed to the state of Delaware. Sussex County, Delaware in particular is a hot market where activity is driven towards the East side of Route 1 towards the shore accounting for a significant amount of the activity for the region.
Total housing inventory for the Philadelphia region has dropped 3.9% quarter to quarter. Finished vacant inventory remained flat quarter to quarter rising only 2 units to 2,808 from 2,806. Finished vacant inventory is an early indicator of the health of the new home construction market. If finished vacant inventory continues to increase without being absorbed with an actual home buyer moving in quarter to quarter, as well as the months of supply continuing to increase quarter to quarter is an early sign of a weakening housing market. In the Philadelphia region it is also a valid indicator, but not the only indicator only because this market historically does not build too many speculative homes. We are a pretty tight market in regards to when we start a home. Most often a home that is finished vacant will be occupied at some point in the next 5 to 6 months after it started since the home most likely is under contract. Most communities in this market will only have one model home available if they have one at all.
Annual Starts pace and closings pace for the Philadelphia MSA in the 4th Quarter saw a 2.2% and 4% increase respectively off of the pace from 3Q14. The starts pace ended the quarter at 5,171 starts and closings came in at 5,193 closings. The Philadelphia MSA is led by the activity occurring in Bucks County, Montgomery County, Chester County, and New Castle County in Delaware.
“The median closing price for a new home in the Philadelphia region was $337,100, up 3.3% from 3Q14,” said Quita Syhapanya, Director of Metrostudy’s Northeast Region. “Year over year change was a 2.1% increase for 4Q14. The median closing price for a single family home ended 4Q14 at $360,100, a 2% increase over 3Q14 and a year over year increase of 3.9%. Price increases are due mostly to product type mix rather than any significant change to housing fundamentals.”
In 4Q14, there were 22,557 Vacant Developed Lots (VDL) in the Philadelphia Region. Finished lots decreased by 1.6%. Year over year vacant developed increased by 2.5% which is more to do with the fact that this time last year the region was hit with some significant weather that delayed new developed lots.
“Philadelphia County continues to be in short supply of finished lots with only 9.9 months of supply,” said Syhapanya. “Most of the new home construction occurring in Philadelphia is of the tear down and in-fill type of building. The Philadelphia MSA also faces a short supply of available finished lots. Our 4Q14 numbers show that there are only 8,318 finished lots available, a 19.3 months’ supply. Montgomery County, which is an in demand market with good schools, only has 16.3 months of supply. Delaware and Bucks counties are both still less than 20 months of supply for finished lots.”
The Philadelphia Region for new home construction has been an anomaly. Numbers swing back and forth due to seasonality in the Northeast. The housing market in this region is predictable only in that 99% of the time 4Q and 1Q to always be down relative to the other quarters when tracking activity. With seasonality it is important getting a gauge year over year to see how the market faired in the same three months in the previous year. The caveat this year is that around this time last year is where this region experienced the Polar Vortex which was thought to have slowed down the housing market not only in the Philadelphia Region, but across the country due to supply chain and logistics of manufacturers that are based out of this region.
The same positive forces that many experts and economist speak about in regards to continued low mortgage rates, economy strengthening, jobs market getting better, etc. are the same today that they were for the past few quarters. The only problem is that even with these positive factors housing is still caught in lull. So the same negatives are still staring the housing market in the face – like tight credit standards, a still tepid job market, debt for first time buyers, and high prices that have moved builder strategies to only build higher ticket homes. Many in the industry were disappointed by 2014’s housing market. Moving forward many who work in the housing industry are playing their cards close to the vest as they play the wait and see game. The market has slowed down this year but 2015 is expected to see growth in housing.
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