Home prices drop 2.4% in Phila. for fourth quarter

After holding steady during most of 2011, single-family house prices in the city fell 2.4 percent in the fourth quarter, an analysis by economist Kevin Gillen shows.

That means that since the housing downturn began in the eight-county region in August 2007, Philadelphia single-family prices have fallen a cumulative 18 percent, Gillen, vice president of Econsult Inc. of Philadelphia, said.

Prices of houses in the city - excluding condos, which technically fall into the multifamily category - are now at 2005 levels, Gillen said.

Prices for the entire Philadelphia region also showed a downward trend. They had fallen 3.9 percent in the previous 12 months and were expected to drop an additional 2.7 percent in the fourth quarter, according to the Fiserv-Case Shiller Indexes for the third quarter of 2011, released Monday.

On the up side, however, Fiserv predicts that the region's prices will rise 5.8 percent between the third quarter of 2012 and the same three months of 2013, below the 3.8 percent projected for almost half of the other 379 metro markets in the country

Fiserv said average U.S. home prices are a third below peak 2006 levels, and housing affordability is higher, with the ratio of monthly mortgage payment to median family income the lowest since 1994.

In Philadelphia, Gillen said other housing indicators are giving mixed signals: It is cheaper to own a house than rent in the city. The foreclosure rate is also 28 percent below the U.S. average, "and is trending downward."

Not all neighborhoods took a price hit, Gillen said. While prices in University City fell by 12.8 percent and those in northwest Philadelphia dropped 5.5 percent, they were up 1.5 percent in the Kensington/Frankford area.

Sales remain way down, he said. The quarter saw 2,861 houses change hands, compared with 2,817 in the same three months of 2010.

This was 36 percent below what Gillen called the city's "historic average," and 64 percent below the boom period of 2005-07.

He said the price declines were in line with what the rest of the country has been seeing lately, but that the city's cumulative decline of 18 percent remained below the average of 33 percent that "has afflicted the top 20 largest U.S. cities," which are tracked by the Case-Shiller Home Price Index.

There are, however, a lot of houses for sale in the city - more than 9,000, Gillen said.

"While this is down modestly from its peak of over 12,000 back in 2006, it is still well above the pre-bubble historic average of approximately 5,500," he said.

"When you combine this above-average supply of homes for sale with the below-average level of sales, this supply-demand imbalance would appear to be continuing to exert downward pressure on prices," Gillen said.