Economist: ‘There’s plenty of good news, relatively speaking’
Monday, September 26, 2011
By Kevin Gillen, Ph.D
As an economist who writes and speaks frequently about our region’s housing market, I’m asked if I could deliver some good news for a change. I often respond with, “Sure: the good news is that the bad news is a lot worse everywhere else!”
Outside of Pennsylvania, the typical U.S. home has depreciated in value by more than 30 percent since the bursting of the housing bubble, according to Case-Shiller’s 20-City composite house price index. That is a larger decline than what was even seen during the Great Depression. But here in Pennsylvania, the average home has fallen in value by only nine percent, according to the Federal Housing Finance Agency (FHFA); less than a third of the national decline.
Even though the Commonwealth’s largest city of Philadelphia has fallen 19 percent from its peak, that’s still less price deflation than in 18 of the 20 cities tracked by Case-Shiller. And the Commonwealth’s second-largest city, Pittsburgh? Its average home price has fallen zero percent, according to FHFA. You read that right: zero deflation.
Of course, price deflation puts homeowners underwater: owing more money on their mortgages than what their houses are currently worth. Currently, about a quarter of all U.S. homeowners are in such a situation, according to research by Zillow. (Maybe they should be referred to as “homedebtors,” instead?) In Pennsylvania, only about eight percent of homeowners are in such a situation. Not only is this significantly less than the national average, but only three states (NY, OK and ND) can claim a lower percentage of negative equity than us.
Where there is negative equity, there are foreclosures. According to RealtyTrac, one in every 570 American households received a foreclosure notice last month. In the hard-hit Sunbelt states of California, Nevada, Arizona and Florida, the number is one in every 242 households. In Pennsylvania? Only one in every 1,166 households received a foreclosure notice last month. Even in the hardest-hit county of Philadelphia, the number is one in every 800 housing units; still well above the national average.
Still, there’s no doubt these are enormously challenging times for real estate agents and others in the housing industry. While many of our numbers may be better than the national averages, the one that has taken a big beating is home sales, which are currently running well below their normal levels. Until our inventories come down, the economy picks up and lending condition loosen up, the current sluggish market conditions will continue to prevail.
As bad as these current times may seem to be, we actually should be grateful for how relatively good they are.
| About Kevin Gillen, Ph.D: Kevin C. Gillen, Ph.D. is a vice president with Econsult Corp., a Philadelphia-based consulting firm, and a research fellow with the University of Pennsylvania’s Institute for Urban Research. He can be reached at gillen@econsult.com. |
