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October 12, 2015

Philly home prices rise dramatically since early 2014, report says

Philly is seventh on Marketwatch list of 10 most overvalued housing markets in U.S., showing fastest rise

Real Estate Home Prices
West Philadelphia Row Home Thom Carroll/PhillyVoice

Vibrant rowhomes with large porches are a common sight in West Philadelphia.

An analysis of home prices in the top 100 real estate markets in the United States indicates that Philadelphia home prices have appreciated quite rapidly, according to a Marketwatch report.

Philly-area home prices have risen so dramatically – 16.7 percent in the past 18 months or so – that the city recorded the fastest home price increase of any city on Marketwatch's top 10 list of most overvalued housing markets, which included Austin, Texas, District of Columbia, Miami and Dallas.

Data from the first six months of 2015, according to a report published Monday by real estate analytics firm CoreLogic, show Philadelphia with home prices that are 14.2 percent over sustainable levels.

An overvalued housing market has home prices that are 10 percent or more above the long-term sustainable level (which measures home affordability based on the per capita income levels in the area).

Diminished supply is driving the overvaluation, MarketWatch reported.

The primary driver behind the overvaluation of more housing markets is supply, says Sam Khatar, the chief economist at CoreLogic. “Builders are not building enough – they’ve focused on margins and not scale,” he says. This, in turn, has led them to focus on the upper end at the expense of the middle and lower end of the markets, where demand is strong once again, he says.
Of course, there are still plenty of individual deals to be found, even in overvalued markets. And, as Khatar points out, “just because a market is overvalued doesn’t mean it’s a bubble.”

MarketWatch has the 10 most overvalued housing markets in America.