If you are looking at buying real estate in Philadelphia in 2021, you must read until the end. Philadelphia is a hot seller's real estate market by all housing indicators. There is a huge gap between supply and demand leading to a rapid price appreciation. Philadelphia home prices rose by nearly 13% in 2020. The same trend is predicted for 2021. Low-interest rates, tight supply, and high buyer demand will keep the market hot and exert even more upward pull on house prices.
August saw a slight decline in demand, relegating the Philadelphia metropolitan area to the moderate category. With fewer completed and pending sales and decreasing demand, buyers who have withdrawn from the market may wish to reconsider. Both Philadelphia and its environs remain seller's markets. The median sales price of single-family homes in the Greater Philadephia housing market has reached $325,500, up 16.3% year-over-year.
Philadelphia Housing Market Trends & Forecasts 2021 – 2022
We shall now discuss some of the most recent housing trends in the Philadelphia area which will help you understand the way the local real estate market moves in this region.
Philadephia Is a Seller’s Real Estate Market
Philadelphia has been one of the hottest real estate markets in the country in 2020 and its market temperature remains sizzling hot. It means that the demand from buyers is exceeding the current supply of homes for sale. With low inventory and low interest rates for buyers, both Philadelphia and surrounding counties have seller’s markets right now.
As a result, regardless of the location of your purchase, the market will be nearly identical – competitive. The pricing of homes is trending higher and is more attractive for sellers in the current phase. The level of competition, however, can vary from county to county or city to city. Overall, the shortage of supply and an increase in the demand for housing will push the prices higher in the Philadelphia metro region.
The following housing report of the Philadelphia Metro Area is based on July 2021 Bright MLS housing data. In the past month, houses in the Philadelphia metro area sold for higher prices and that is mainly due to low mortgage rates and tight inventory. As new listings are still low as compared to last year's numbers, the housing inventory has been squeezed further leading to a surge in asking prices of the Philadelphia properties.
Philadelphia Housing Demand Index
In the Philadelphia market area, demand for new homes has slowed over the past three months, with the largest monthly drop occurring in July. Due to a lack of available inventory, affordability has been declining as home prices have continued to rise. This has been compounded by a seasonal drop in buyer interest during the summer months, which has contributed to the pullback. The Philadelphia Metro T3 Home Demand Index fell nearly 18% in July, marking the third consecutive decline since April's peak. The Index, at 115, reflected Moderate demand and was 16% lower than a year ago.
Demand for all home types tracked by the index fell in July, reflecting a market-wide drop in buyer interest. Demand remained strong for higher-priced single-family homes. Ocean County had the highest demand, with an Index reading of High. Slow or Limited demand in five of the region's 11 counties kept demand steady in Central Pennsylvania. Buyer interest was high in the Philadelphia suburbs and steady or slow in the New Jersey portion of the metro area. One-third of Greater Philadelphia ZIP codes had High demand, while nearly one-third had Slow or Limited interest.
Philadelphia Housing Price Trends July 2021
- Median prices rose 0.2 percent from June to a new high of $325.5K.
- Detached home prices held at a ten-year high of $389.9K for the second month (18 percent from last July).
- Delaware ($295.0K), Montgomery ($386.0K), Kent ($293.0K), and New Castle ($315.0K) all saw ten-year highs.
- Gloucester County detached homes hit an all-time high of $299.8K, up 22% YOY.
- Chester County townhomes hit an all-time high of $371.0K, +16% YOY.
|County||Jul-21||vs. Jul-20||vs. Jul-19||YTD 2021||vs. YTD 2020|
|New Castle County||$315.0K||22.5%||26.0%||$281.0K||12.4%|
Philadelphia Housing Sales & Contract Signings
- According to BrightMLS, overall, sales fell only 2% from the post-lockdown rush last year.
- Attached home sales increased 5% year over year in July to a record level.
- Burlington (160 units, a 65 percent year-over-year increase).
- Chester (254 units, a 36 percent year-over-year increase).
- Mercer (106 units, a 47 percent year-over-year increase).
- County townhomes saw closed sales reach an all-time high.
- Following June's all-time high, Kent County set a July record with 297 sales (+9% year over year).
- Camden County townhomes had their best July on record in July, with 139 closed sales, an increase of 8% year over year.
- New pending sales (8,815, down 7% month over month) were in line with the seasonal decline of 8% typically seen
between June and July.
- Philadelphia County (1606) decreased 13%, sharper than the typical 8% June to July decline.
- New Castle new pending sales hit a new July decade high (825 units, +1.1% year over year).
Philadelphia Housing Supply Trends July 2021
Compared to the five-year average of 9 percent decline in new listings, there was a significant decline (22 percent) in new listings from month to month in September.
- New listings were down 17% year over year, with condos accounting for the majority of the decline (740 units, down 23 percent)
- Burlington townhome's new listings experienced their third best month on record (175 units, an increase of 32% ).
- Demand continued to be strongest in the higher-priced single-family segment.
- The months' supply remained extraordinarily lean across all segments of the market, ranging from 1.2 months for mid-priced single-family homes to 4.2 months for higher-priced condos.
- Attached home new listings in Philadelphia County fell significantly (1,840 units, down 25% month over month, compared to the five-year average of a 6% decline from June to July.
- Demand for townhouses has been elevated for several months, with the latest data still reflecting solid demand even if at a modestly lower level.
- The months' supply increased marginally to 1.8 in July, with a slightly stronger increase in inventory offset only partially by an increase in sales.
Median Days on Market
Additionally, this housing indicator indicates that this metro area is experiencing a strong seller's market. Homes are selling quickly, and in some areas, extremely quickly. In a “balanced” market, the average days on market (DOM) for a home is between 60 and 70 days.
- Median days on market increased by one day and landed at 8 days.
- Median days on market for townhomes hit a July decade low of 8 days.
- Delaware County’s median days on market (7 days) rose for the first time in three months (+1 day).
- Montgomery County detached homes stayed at a record low day on market (6 days) for the fifth month.
Philadelphia Real Estate Foreclosures
In Pennsylvania, foreclosures in Philadelphia continue to be high. Philadelphia foreclosures make it a large distressed seller's market. In 2019, Philadelphia had one of the highest foreclosure rates in the U.S. at 0.75%. About 5,000 Philadelphia properties entered foreclosure, according to Attom Data Solutions. That’s down significantly from 2010 when more than 12,700 properties reported foreclosure filings.
In January 2020, Philadelphia was one city that was highlighted for having a high foreclosure rate. One in every 1,072 housing properties in the area was a foreclosure back then. To solve this problem, the Pennsylvania Housing Finance Agency has been working with homeowners via their Residential Mortgage Foreclosure Diversion program.
According to the Philadelphia Inquirer, the city’s this program, born out of the recession in 2008, has prevented nearly 14,000 foreclosures. The program assists homeowners by working with lenders to help lower mortgage payments and provides a moratorium on foreclosures for eligible Philadelphians burdened with liens.
Sheriff's sales of homes in Philadelphia are scheduled to resume in September. Before the pandemic, the city's foreclosure cases must still be processed through Philadelphia's Mortgage Foreclosure Diversion Program. The city's foreclosure rate is “still quite low,” according to Chelsea Barrish, vice president of program impact at Clarifi, a financial counseling nonprofit based in Philadelphia. Residential foreclosures in Philadelphia have remained between 20 and 30 per month, according to Michael Froehlich, managing attorney of Community Legal Services' homeownership and consumer rights unit.
The American Rescue Plan Act, the federal coronavirus relief package, allocated $350 million to Pennsylvania to help homeowners with mortgage payments and other housing-related expenses. This package is intended to avert mortgage defaults, foreclosures, utility shutoffs, and home foreclosures. The Pennsylvania Housing Finance Agency, which will administer the state programs, is still working out the details, but homeowners may be able to use funds to pay off delinquent mortgages, property taxes, insurance, and utilities. Pennsylvania's programme is set to begin in late fall.
Philadelphia Real Estate Market Forecast 2021 – 2022
What are the Philadelphia real estate market predictions for 2021 and 2022? Philadelphia housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the nation. Three and four-bedroom row houses and attached homes are the most common housing units in Philadelphia. Other types of housing that are prevalent in Philadelphia include large apartment complexes, single-family detached homes, duplexes, and homes converted to apartments.
LittleBigHomes.com publishes forecasts for the trend in home prices in 380 Metropolitan Statistical Areas. According to them, the highest annual change in the value of houses in the Philadelphia Real Estate Market was 18% in the twelve months ended with the 2nd Quarter of 2005. The worst annual change in home values in the Philadelphia Market was -5% in the twelve months ended with the 1st Quarter of 1995.
The highest growth in home values in the Philadelphia Real Estate Market over a three-year period was 50% in the three years ended with the 4th Quarter of 2005. The worst performance over a three-year period in the Philadelphia Market was -9% in the three years ended with the 2nd Quarter of 2011.
Let us look at the price trends recorded by Zillow (a real estate database company) over the past few years. Since Sep 2011, the typical home value in Philadelphia County has appreciated by nearly 64%. For a period of almost three years, 2013 t0 2016, the house prices remained flat without much appreciation. From mid-2016, we can see a steep rise in housing prices and they have gone up 11.9% over the past year alone.
Similar growth has been recorded by NeighborhoodScout.com as their data also shows that in the past ten years, Philadelphia real estate appreciated by nearly 52.40%. This amounts to an annual real estate appreciation of nearly 4.30%, which puts Philadelphia in the top 30% nationally for real estate appreciation. In the latest quarter, the appreciation rate has been 1.52%, which annualizes to a rate of nearly 6.2%.
This figure corroborates Zillow's positive forecast. It confirms that home prices in this region are expected to continue their growth over the next twelve months. First-time home buyers will remain a strong force while younger Gen-Z buyers are expected to play a growing role in this housing market as well. Both Generation Z homebuyers and those New Yorkers seeking more bang for the buck will keep houses moving in Philadelphia.
Here is the latest housing forecast for Philadelphia, Greater Philadelphia, and Philadelphia County until July of 2022 (Zillow Home Value Forecast). And as long as mortgages remain cheap, the real estate boom in Philly should continue into 2021. There's good profit potential for the period of one year if you are looking for homes for sale with good flipping profit. It can be a profitable property investment opportunity if you can find a good deal. A long-term investment in Philadelphia real estate will yield even greater profits.
- Philadelphia-Camden-Wilmington Metro or The Delaware Valley home values have gone up 16.9% over the past year and Zillow predicts they will rise 10.8% in the next twelve months.
- In the city of Philadelphia, home values have gone up 14.9% over the past year and they will continue to rise in the next twelve months.
- Philadelphia County home values have gone up 14.9% over the past year and they will continue to rise in the next twelve months.
- Bucks County home values have gone up 17.8% over the past year and they will continue to rise in the next twelve months.
- Chester County home values have gone up 14.8% over the past year and they will continue to rise in the next twelve months.
- Delaware County home values have gone up 18.4% over the past year and they will continue to rise in the next twelve months.
The chart below, created by Zillow, shows the growth of median home values since 2011 and their forecast until July 2022.
Philadelphia Housing Market Overview for 2020
The ongoing pandemic has not had any impact on Philadelphia home prices. Historically low interest rates, tight inventory, and strong demand are continuing to favor sellers in the Philadelphia housing market. New Yorkers moving here in search of more for less also kept the real estate market afloat during the pandemic.
According to data from RENTCafé, Philadelphia bucked a trend of both fewer people renting and more renters moving out of the city in 2020. Overall, rental applications rose by eight percent, and the number of renters moving into the city from elsewhere rose by four percent, while those who left it fell by one percent.
Data from RENTCafé sibling Yardi Matrix shows that 1,843 new units were added to the stock of city apartments in 2020. The suburban inventory grew even more, with 2,757 units coming online this year. Percentage-wise, the city slightly outpaced the suburbs in unit growth.
Here's Kevin Gillen's latest quarterly report for Q4 2020. He is a Senior Research Fellow at The Lindy Institute, and produces quarterly reports on the current state of the region's housing market, providing an overview of the market and its impact on buyers and sellers.
Philadelphia Home Prices
- The average price of Philadelphia homes rose by 5.0% in Q4 on a quality and seasonally adjusted basis. This was a significant acceleration from the previous quarter’s rate of 0.7%.
- The median house price broke $200,000 for the second time in 12 months, hitting $210,000 in Q4 2020.
- Philadelphia’s house prices rose by an average of 12.8% on a year-over-year basis.
- This price appreciation is nearly triple the city’s historic annual average house price appreciation rate of 4.5%.
- The last time that Philadelphia saw such large double-digit appreciation was in 2006.
Philadelphia Sub-Markets Trends
- Annualized (YoY) house price changes in individual submarkets continue to be uniformly positive — and also well above their historic averages
- In West Philadelphia's neighborhoods, the average home price went from $85,000 a year ago to about $120,000.
Philadelphia Home Sales
- After plunging to an 8-year low in Q2 (due to both COVID and government-imposed restrictions on showing homes), sales activity has since risen sharply.
- The number of arms-length sales in Philadelphia was 6,097 in Q4.
- It was up from 5,339 in Q3, which in turn was up a whopping 71% from just 3,127 transactions in Q2.
- This is well above the 4,000 average, even though slightly lower than the number of transactions in the same quarter of 2019.
Philadelphia Housing Supply
- The Philly housing supply dropped to an all-time low of 2,511 houses listed for sale. That’s 60% less than the historical average of 7,400.
- It is also the first time that the supply of homes available for purchase has fallen below 3,000 housing units for sale.
- When supply is low, buyers tend to bid higher than what they would otherwise before another buyer beats them to it.
Day On Market
- In a market that is considered “balanced,” the housing market predicts that the average days on market (DOM) for a home is 65 days.
- In Philly, the average was 41 days, showing a strong favorability to sellers.
- This is just 7 days shy of the previous record of 34 days, set way back in July 2005.
Inventory and Months' Supply
- At the current pace of sales and the current level of inventories, Philadelphia would completely burn through its current supply of homes available for sale in just 2.2 months.
- If inventory levels are around 6.5 months, there is a balanced real estate market. This is the historical statewide benchmark for the monthly supply of home inventory available for sale.
- It clearly shows that Philly is a seller's real estate market.
Philadelphia Real Estate Investment Overview
Should you consider Philadelphia real estate investment? Many real estate investors have asked themselves if buying an investment property in Philadelphia is a good investment? You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2021 & 2022. Let’s talk a bit about Philadelphia before we discuss what lies for investors and homebuyers.
Philadelphia is one of the oldest and largest cities in the United States. Philadelphia is too often written off as a has-been, a historical city that has joined the Rust Belt. However, this city is on the rebound and the Philadelphia real estate market predictions show us an excellent opportunity for investors in 2021. It is the largest city in Pennsylvania and the second largest on the East Coast. It is the sixth biggest city in the United States (Phoenix has beat out Philly for that spot in the top five).
And unlike many other big cities, its population is slowly growing. Its population has grown every year for at least seven years, and it is the second-fastest-growing county in the region. How big is the Philadelphia Housing Market? Well, more than one and a half million people live in Philadelphia proper. Philadelphia is in the hub of the Delaware Valley. That is the sixth-largest metropolitan area in the United States. That metro area is home to around six million people.
If you only look at Philadelphia and its immediate suburbs, then the Philadelphia housing market still includes four million people. Let’s look at the state of the Philadelphia real estate market and the factors driving the market in the short and long term. This article alone is not a comprehensive source to make a final investment decision for Philadelphia.
Density Provides Opportunity
One downside of a thoroughly built-up market is that you cannot expand out – everything else is already built out. This means you can only really build up, redevelop, or subdivide. The relative lack of supply compared to demand also keeps rents and property values strong, too. More than half of the jobs are in Center City and University Center, meaning that nearly everyone wants to live in and around these areas. If you can find properties to convert into multi-family housing or luxury housing, you’ll earn a significant return on the investment.
Philadelphia Real Estate Is Very Affordable
The median selling price for Philadelphia real estate is around $208,000. These prices vary wildly depending on the perceived safety and desirability of the neighborhood. The fact remains that you can find $40-$60,000 single-family homes for sale that you can rent out to single mothers with children who would value a little privacy. You can find condos and older homes that could be renovated and flipped with a modest profit margin. In several zip codes within the Philadelphia housing market, more than 10% of real estate transactions are “flipped sales”.
Strong Real Estate Appreciation
We’ve addressed the ROI you’d likely see as a landlord. The other half of that equation is the increasing value of the property you’d recoup if and when you sell it. According to Zillow, Philadelphia properties saw a roughly 11% price increase in the last twelve months, and they expect prices to go up in 2021 as well. Philadelphia appreciation rates continue to be some of the highest in the nation, including the larger metro area where the months' supply has shrunk to 1.1 months.
One of the best investment opportunities in the Philadelphia housing market is those areas you already know everyone wants to live. For example, the Graduate Hospital neighborhood is hot. The 19118 and 19106 zip codes are seeing the greatest property valuations and price increases.
Interestingly, there are zip codes next to these that have seen flat and declining values; if you buy properties in the 19132 or 19125 zip codes that have flat or falling values and attract those wanting to live in 19121 or 19133, you could see significant returns. This means you don’t have to do deep research or guess to know how to profit from the Philadelphia real estate market.
Highest Appreciating Philadelphia Neighborhoods Since 2000 (By Neighborhoodscout.com)
- E Girard Ave / N Delaware Ave
- E Girard Ave / E Palmer St
- E Norris St / Aramingo Ave
- Port Richmond
- S Columbus Blvd / Packer Ave
- Pattison Ave / S Broad St
- S 6th St / Dudley St
- S 10th St / Mifflin St
- S 5th St / Mifflin St
The Large Philadelphia Rental Market
Around 46% of housing units in the Philadelphia housing market are rented out, somewhat higher than the national average. This is driven in part by the relatively poor urban population and in part by the higher than an average number of singles living alone. Center City has a large, carless population that will prioritize living by public transit and, because they don’t have a vehicle, cannot move out to the suburbs. Do your legal research before you buy rental properties in the Philadelphia real estate market because you’ll be subject to taxes and fees that aren’t mandated by Pennsylvania state law.
Nearly every large city is home to universities, themselves home to a large population of renters – students. Philadelphia as both an old and large city contains several universities. There are twenty-four-year universities alone in Philadelphia, several of which are in Center City. There are another dozen two-year and tech schools in Philadelphia. And adding to the diverse Philadelphia student rental market are the medical schools and seminaries in the city.
The traditional rental income from properties in the Philadelphia housing market is $1300 a month, though this value includes everything from two-bedroom single-family homes to five bedrooms three bath luxury properties. If you use the median property value of $200,000, the traditional cash-on-cash return for these properties is 2.6%. Find a deal or upgrade a home to cater to an upscale market, and you’d see better rates of return.
There is another reason to expect better ROI, and that is the fact that rents in Philadelphia are rising. The median rent for properties in the Philadelphia housing market is estimated to be $1400 a month, though that’s lower than you’d see in the surrounding suburbs. There is only room to go up. As of September 5, 2021, the average rent for a 1-bedroom apartment in Philadelphia, PA is currently $1,350. This is a 10% decrease compared to the previous year while studio apartment rents have remained flat. The rental market should remain strong. While Yardi Matrix’s Ressler says the region will add some 12,000 units to its apartment inventory over the next two years, he also predicts rents will rise modestly in the city and a good deal more in the suburbs.
The Strong Short-Term Rental Market
While other major cities have waged war on Airbnb and other short-term rental sites, Philadelphia realizes this is a good way to cater to tourists and help local homeowners earn income. This is why Philadelphia stands out as friendly to short-term rental sites like Airbnb. One of the few conditions to meet is the payment of the 8.5% tax on all profits and you don’t make the property not look like a home. Note that these rules apply to primary residences. As a non-resident landlord, you can rent out homes via Airbnb, too, but you have to apply for a visitor accommodations variance. Multi-family housing can also be rented out via Airbnb in Philadelphia if you fill out the right paperwork.
It Is Relatively Landlord-Friendly
Many real estate investors want to know if an area is landlord-friendly or tenant-friendly. Pennsylvania itself is generally landlord-friendly. Philadelphia, though, is somewhat stricter. In early 2018, the City Council discussed laws that would limit evictions to those cases with just cause. Just cause does include failure to pay rent, nuisance behavior, and breach of the lease. You simply cannot evict someone to renovate the property.
The tenant would have to be given a chance to accept a new lease or higher rent when renewing the lease, rather than being evicted. Other laws are much more land-lord friendly. There is no payment grace period law. There aren’t limits on late fees. There are no pet laws. While the state of Pennsylvania doesn’t require a license to rent out a house, anyone buying properties in the Philadelphia housing market does have to get a commercial activity license and housing rental license.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States.
We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Philadelphia. The Philadelphia real estate market offers an ideal mix of affordable properties you can snap up and a large population of renters who aren’t going to buy homes any time soon. You won’t face the same hostility as a landlord as you might in New Jersey or New York, whether renting to long-term tenants or tourists.
Another hot real estate market in the state of Pennsylvania where you can invest for the long term is Harrisburg. Harrisburg has a more favorable legal and tax climate, and it is stable. That makes it a good choice for real estate investors as long as you are investing in rental income instead of massive capital gains. And you could still earn a lot of money with fix-and-flip in the Harrisburg housing market.
On the south of Pennsylvania lies the state of Maryland. In Maryland, Baltimore is a favorable destination for real estate investors from all over the country. If you are looking for an affordable real estate market with a high potential for return on investment, you should consider Baltimore. Baltimore's real estate appreciation rate in the latest quarter was around 1.9%. Looking at the positive forecast, the annual appreciation rate is predicted to be between 7% to 8%.
On the east of Pennsylvania lies the expensive New York City real estate market. Even though New York City is one of the most expensive real estate markets in the world, there are relatively affordable neighborhoods where people compete for apartments and homes. NYC real estate is most likely to be a profitable investment when rented out over a long holding period.
If you are looking to make a profit, you can buy and hold an investment property in NYC that you might move into or sell at retirement in the future. NYC real estate investment has a track record of being one of the best long-term investments in the nation. NYC's real estate prices have appreciated by roughly 42% over the last decade.
Not just limited to Philadelphia or Pennsylvania but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Philadelphia turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.
Let us know which real estate markets you consider best for real estate investing in 2021!
Remember, caveat emptor still applies when buying a property anywhere. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.