Wednesday, April 30, 2014

Philadelphia Marketwatch Report - March 2014

Click to see the numbers up close

If you're a regular PUL reader, you have seen my MWR blog posts before. If you're new to PUL, I encourage you to read this regular post!

The MWR from Trend (or the MLS as most people call it), focuses specifically on real estate in/around Greater Philadelphia. There are individual reports available for the entire 5 county area in Southeastern PA (and also for Berks County, so let's call it 6), as well as for Southern NJ and Northern DE.

My focus is always on the Philadelphia report specifically, as that is the center of our local real estate market. The same data/report is available for each of the other aforementioned counties as well.

The report for Q1 2014 (aka March 2014) is still moving in a positive direction overall, as was the Q4 2013 report that I posted back in February. The report's key metrics show that Philadelphia's Average Sales Price is up, Closed Sales are down, Homes for Sale (aka Supply) are down, and the Average Property Marketing Period (aka Marketing Time) is down.

Please note that these stats are based on year-over-year changes, to help compare the real estate market in Q1 2014 to Q1 2013. I wanted to reiterate this so people don't assume these statistics are month-over-month, which is a hard comparison to make in the real estate industry (due to weather changes, school calendars, etc). These factors play an important role with people looking to buy/sell real estate.

So, let's break these down one-by-one:

1. Average Sales Price: $200,320, up 10.1% from Q1 2013, which is a big jump. Why do real estate prices go up? Simply put, supply and demand. If supply is low, demand is high; and vice-versa. That is what's happening here, and that is also what allows homeowners to build equity. Building equity is one of the prime reasons people decide to buy real estate in the first place.

2. Closed Sales: 2,252, down 12% from Q1 2013. That is the first decrease reported since I began putting this regular blog post together. The only thing I can attribute it to was the brutal winter we just went through. As a real estate agent working on the street everyday, I would say it's the most likely reason why the numbers dropped. When there is a snow storm going on, you cannot look at homes, you cannot make offers, and you cannot have closings. Philadelphia had its fair share of storms this winter. For those who need another reason besides weather, it could also be attributed to the sharp increase in prices and a lower level of inventory. That has been a recent complaint from buyers all across the US. If there aren't enough homes for sale, the number of closings will go down.

3. Homes for Sale & Months Supply: Down 12.5% and 17.6% from Q1 2013. As stated before, if supply is low, demand is high. If demand is high, prices go up. If prices go up, there is more competition to buy real estate. If there is more competition to buy real estate, there are more bids for each property. And so on, and so forth. Low supply is good for sellers, and bad for buyers; which means we are transitioning from a Buyer's Market to a Seller's Market.

4. Average Property Marketing Period: 102 days, down 7.7% from Q1 2013. This means that the average seller requires less time to accept an offer on his/her home. When sellers have to wait for long periods of time to accept an offer, what typically happens? They lower their asking/listing price to attract more buyers and buyer agents. When sellers don't have to wait as long to accept an offer, what typically happens? Prices remain stable and/or start to go up.

Most of these metrics may seem self-explanatory, but I personally find that it helps to break them down individually and explain what it means to the local Philadelphia market. Please note that this is a general overview of what is currently going on in Philadelphia, which means that some neighborhoods will be different than others.

If you would like the most recent MWR report (for your specific county), please don't hesitate to contact me via phone/email/text.

I will email you a customized PDF.

Wednesday, April 23, 2014

The building boom has begun

One of Center City's latest residential high-rises | 2116 Chestnut

At least, in the City of Brotherly Love, it has begun.

It's been a long-time-coming, but the real estate market has finally started to pick up steam once again. Both residential and commercial projects (big and small) are popping up left and right, and in varying areas; underway and on-the-books. Center City, University City, The Navy Yard, as well as within many of Philadelphia's different neighborhoods spread throughout the city.

In other words, it's healthy growth.

The only issue that seems to be popping up is labor. When things were pumping back in the early 2000s, the construction industry was seeing record gains in both employment numbers as well as in profits.

When The Great Recession hit, the US lost 2 million construction jobs. Since that time, many of those workers retired, left the industry altogether, or got into another line of work. This is creating a shortage of specialized labor in Philadelphia, which in turn is causing prices to go up. High demand and low supply, prices go up.

So enough with the negative, as you all know that's not my bag. Here's a section from the article that caught my attention:

"A construction boom underscores a bigger trend at work," said Stephen Mullin of Econsult Solutions. "It’s in response to a city embracing demographic shifts in people, including immigrants, wanting to live in urban areas. It’s an adjustment in people’s behavior on where they want to live, relax, and shop. Philadelphia is an attractive place to live, and the vibe and vitality of the city is infectious and generating a ton of infrastructure and capital investment to the tune of billions of dollars. We are nowhere near the end of that.”

Good stuff, Mullin. And right on point, if I do say so myself.

So, now that Mr. Mullin has named a few of the reasons why things are changing for the better in Philadelphia, here is a list of the larger, upcoming projects that are sure to keep that momentum going ("20-To-Watch," as Natalie Kostelni from PBJ has coined it):

10 Big Projects - Under Way

- 38 Chestnut: 38th St & Chestnut St, $110M
- New College House on Hill Field: Bounded by 33rd, 34th, Walnut, & Chestnut Sts, $127M
- Southstar Lofts: 521-31 S Broad St, $32M
- 3601 Market St: 36th St & Market St, $110M
- Church of Jesus Christ of Latter-Day Saints Temple: 1601 Vine St, $70M
- Philadelphia Family Court: 15th St & Arch St, $160M
- Children’s Hospital of Philadelphia Buerger Center: CHOP’s Main Campus, $425M
- EVO at Cira Centre South: 2930 Chestnut St, $160M
- Drexel University, Mixed-Use Project: Lancaster Ave & 34th St, $160M
- Wistar Institute: 3601 Spruce St, $100M
- Total, In-Progress = $1.454B

10 Big Projects - For The Future

- Comcast Innovation + Technology Center: 18th St & Arch St, $1.2B
- FMC Tower at Cira Centre South: 30th St & Walnut St, $340M
- 1919 Market St, Mixed-Use Project: $100M
- W Hotel: 1441 Chestnut St, $280M
- SugarHouse Casino, Expansion: 1001 N Delaware Ave, $155M
- Lincoln Financial Field, Expansion: 1 Lincoln Financial Field Way, $125M
- University of Pennsylvania, Neural Behavior Sciences Building: Between Leidy Labs at 3740 Hamilton Walk & Carolyn Lynch Labs at 433 S University Ave, $78.5M
- Temple University Library: N 13th St, $150M
- Rodin Square: 21st St & Hamilton St, $140M
- Total, On-The-Books = $2.568B

Wow, that's an impressive list!

But in reality, it's just the list showing major projects. This does not include smaller, infill development in neighborhoods like Northern Liberties, Francisville, Pennsport, Chestnut Hill, and even in my own 'hood of Manayunk/Roxborough.

All of this activity will make the next few years in Philadelphia very exciting, as we start to see these projects come to life.

Thursday, April 10, 2014

Traffic patterns in Philadelphia are changing real estate development

If you don't believe me, check out this article. It's pretty sweet.

The subject caught my attention for a few reasons, as cited within: 1) Major highway traffic is lower than forecasted, 2) Suburbanization is now trending toward the city, and 3) Millennials like to use mobile devices while in transit.

In traditional Philly Urban Living fashion, let's break these down.

1) Major highway traffic is lower than forecasted: This one actually surprised me, as I do drive on the Schuylkill regularly. The decrease in traffic was not only true for the PA Turnpike, I-76, and I-95, but it was also true for the NJ Turnpike (where since 2005, overall volume has decreased by 10%); seriously? So what does all of this mean, and why am I blogging about it? It means that urban populations are rising, it means that downtowns/cities are reaping both private/public investment dollars, and it means that cars are becoming less desirable for many people (especially younger people; we'll get to that). We can get into the nitty-gritty and talk about The Great Recession, rising gas prices, overall car prices, and parking, but in general, public transportation is on the rise in major metros across the country (not just in Philadelphia). This is changing the way we think about getting around our respective neighborhoods/towns/cities, and how we live our lives.

2) Suburbanization is now trending toward the city: As stated in the article, "We had a 50-year period of unrestricted suburbanization, and now there's a dramatic shift." I've talked about this one in past blog posts, many times over. Not because it's my opinion, but because it's constantly being buzzed about in the media. Philadelphia's suburbs are not declining, it's just that preferences are changing; especially amongst the younger crowd. Millennials are a big reason why Philadelphia's population has risen over the past 7 years. There are lots of jobs in Philadelphia. There are lots of restaurants and nightlife/entertainment options in Philadelphia. There is a lot of history, culture, and events in Philadelphia. It's home to our beloved Eagles, Phillies, Sixers, and Flyers. But at the moment, our crime rates are still high and our public schools are very undesirable. Whereas suburban Philadelphia has enjoyed relative safety and great public education since the 1950s. Fix Philadelphia's fledgling public schools, and the biggest reason to flee the city goes away. But as it stands today, preferences are trending toward cities.

3) Millennials like to use mobile devices while in transit: No, really? I feel like I hear about millennials every day of my life now. What do millennials like? What do millennials want? Why do millennials love Twitter? Why do millennials hate Facebook? Why do millennials order pizza, with pepperoni, in their dorm room, on a Tuesday night, before exam week, and pay with AmEx? I don't know, but you get the picture. One thing this article mentioned that really caught my attention, is that you can actively use your mobile devices while riding on public transportation. This is so true, and it's also a reason why so many people text and drive today. People love their phones, and can't stop using them; myself included. If you can read, work, socialize, blog, text, or tweet while you ride to work or dinner, why wouldn't you choose a train/bus over a car. You're there before you know it, and you got some things done on the road; awesome. As we all know already, the most convenient public transportation options lie within Philadelphia proper.

So as you can see, traffic is starting to affect how people think, live, and choose their home. It also affects how investors buy, rehab, and develop real estate.

Who knows, 10 years from now, the President of the United States may be talking to all of us about how we need to create more rail lines. Rather than he/she talking to us about expanding our highways.