Friday, April 12, 2019

How does an Investor Analyze a Condo Market? A Philly Case Study!

(Click on the image to enlarge)

Since the condo market is often the leading indicator of the local housing market, investors try to take a little longer term view of the condo market. That is why I have shown (above) the performance of the condo market since the last recession.

While the Assessor's office lagged in capturing the impact of the recession on the market -- Tax Roll Value/SF continued to front-run the market i.e. SP/SF until 2014 -- they have been on the defensive since the market peaked in 2016, meaning their values have been significantly trailing the market. Of course, one has to be careful in case of statutory fractional assessments, requiring value equalization to avoid having to compare apples with oranges. 

Needless to say, when the Assessor values front-run the market, they tend to encourage unnecessary appeals (of course, I do not know if this had occurred in this particular instance), thus forcing them to be on the defensive the next time around.

Investors tend to follow the Assessor's actions closely while buying or selling portfolios. Obviously, the prospective sellers become a bit nervous when the tax roll values start to trail the market. Conversely, it makes the potential buyers more aggressive while negotiating. 

Again, a longer term perspective is critical.

Thank you,

Sid Som
President, Homequant, Inc.
homequant@gmail.com

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