March 2022 Philadelphia Mastermind Group Key Take Aways!
• The housing market is strong but shows strong signs of deceleration, which is expected to continue. (Kevin Gillen – Lindy Institute at Drexel University)
• Housing prices have risen dramatically. Over the past two years, home prices are up 20%. (Kevin Gillen – Lindy Institute at Drexel University)
• Philadelphia still lags behind the suburbs and is one of the lowest priced counties in the region. Most homes in Philadelphia are priced below replacement cost. (Kevin Gillen – Lindy Institute at Drexel University)
• Million dollar home sales continue to break records in both the city and the suburbs. (Kevin Gillen – Lindy Institute at Drexel University)
• Supply of homes has been very very low. In a normal market, there are 5-7 months of supply and there is currently less than 2 months. (Kevin Gillen – Lindy Institute at Drexel University)
• Building permits are at record levels, but that’s primarily due to changes in the tax abatement plan. The city is dominated by multi-family permits while the suburbs are dominated by single family. Some permits may not come to fruition. (Kevin Gillen – Lindy Institute at Drexel University)
• Affordability has been a big issue in the city even before the uptick in home prices. Philadelphia is the poorest big city in America and the county is the poorest county in the region, due to a low income population. (Kevin Gillen – Lindy Institute at Drexel University)
• History suggests we are nearing the end of the current cycle. Not quite at the peak, but getting close. Sales activity is decelerating year-over-year in most of the Philadelphia region. (Kevin Gillen – Lindy Institute at Drexel University)
• Zillow remains bullish on the region. Zillow projects an increase of 13% in the region over the next 12 months, but that seems rather aggressive and they may be baking general inflation into the forecast. (Kevin Gillen – Lindy Institute at Drexel University)
• It is unlikely the housing market is in another bubble. The US was more exposed in 2005 than it is now – mortgage debt was a larger percentage of GDP. (Kevin Gillen – Lindy Institute at Drexel University)
• Credit availability is much more stringent than it was before the housing bubble. Most homebuyers have a credit score above 700 and not nearly as leveraged as homebuyers from 15 years ago. (Kevin Gillen – Lindy Institute at Drexel University)
• The #1 issue in the city right now is public safety. 90% of serious crime occurs in about 9-10 of the city’s zip codes. The city is now focusing on those areas and addressing the populations in a one-on-one engagement. This “focused deterrence” approach has cut crime in Chester by 40%. (Allan Domb – Allan Domb Real Estate)
• The city is trying to implement mandatory financial education and technology education. They are also working on allowing older students to work one night per week and go to school 4 days, which may help the labor market. (Allan Domb – Allan Domb Real Estate)
• Local and state taxes for businesses are among the highest in the country and a large percentage of jobs created between 2009 – 2019 paid less than $35K. Large corporate tax burden is an obstacle for bringing higher paying jobs to Philadelphia. (Allan Domb – Allan Domb Real Estate)
• Cornerstone Community Partners is an organization that works in underserved neighborhoods with a goal to create and transform neighborhoods. (Chris Gigliotti – Cornerstone Community Partners)
• Multi-family continues to be a hot market in Philadelphia. (Jonathan Weiss – Equinox Management & Construction, Sara McCormick – Ballard Spahr)
• There seems to be more traffic and commuters and landlords are investing into improvements for amenities and common areas to help woo employees back to the office. (Matt Frederick – PernaFrederick Commercial Real Estate)
• Seeing more leasing activity this year than last year. Large blocks of space renting along with smaller spaces. (Edward Opall – EisnerAmper LLP)
• People are utilizing C-PACE loans, which is a program where building owners have the opportunity for low interest financing for energy saving equipment. (Edward Opall – EisnerAmper LLP)
• FOMC meets March 15 and 16 and an update is expected after that. (Paul Flora – Federal Reserve Bank of Philadelphia)
• Small and large developers have concerns over the war in the Ukraine. (Carlo Batts – Rittenhouse Appraisals)
• Seeing larger developments going into areas of the city that haven’t seen much development in the last 30 years. (Carlo Batts – Rittenhouse Appraisals)
• Rent growth is up year-over-year by 11.9% (Paul Fiorilla – Yardi Systems)
• The commercial insurance industry as a whole increased 8.7% across all account sizes during Q4 of 2021 with premium prices increasing for the 17th consecutive quarter. Cyber insurance increased by 34.3%. (Matt Musilli – Johnson, Kendall & Johnson, Inc)
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