Philadelphia Housing Market Trends and Forecast for 2024

As we dive into the Philadelphia housing market in 2024, the dynamics of buying and selling homes in this vibrant city are becoming increasingly fascinating. With a mix of hope, cautious optimism, and adapting buyer behaviors, the current real estate climate reflects various underlying factors that influence demand and inventory. Here are the latest trends in the Philadelphia housing market.

Philadelphia Housing Market Trends 

Key Takeaways

• Home Demand Index: 80 (indicating a recovery from previous months)
• Year-over-Year Comparison: Demand is down 7% from 2023
• Entry-Level Homes: Shift from Limited to Slow buyer interest
• Luxury Condos: Maintained a Steady interest level despite market changes
• Single-Family Homes Below $330k: Interest increased to 73 but still down 14% yearly
• Condos Above $395k: Demand increased to 104, indicating rising interest

Current Market Overview

In August 2024, the Home Demand Index (HDI) for Philadelphia stands at 80, reflecting a recovery from last month’s 75, albeit lower than the 86 recorded this time last year. According to the Bright MLS – T3 Home Demand Index, this gradual increase suggests that buyer engagement is picking up, though it remains a work in progress stemming from fluctuating economic conditions and shifting preferences.

The persistent decline in the year-over-year comparison reveals a lingering caution among buyers, indicative of the broader economic landscape. While home buyers exhibit Slow interest in entry-level houses, certain luxury segments show resilience. Such contrasting trends highlight the varied nature of the housing market—some sectors recovering while others continue to struggle.

Demand and Inventory Trends

Month after month, the statistics indicate a fluctuating yet steady recovery across various housing types:

• For entry-level single-family homes, the demand index shifted from Limited to Slow buyer interest due to slight increases in inventory and heightened market activity. This wave of renewed interest exhibits the potential for an upswing, especially for families and individuals seeking affordable housing options.
• Meanwhile, luxury condos have experienced Steady interest at 104 on the demand index, showing a slight increase. Despite broader economic challenges, the allure of high-end living in Philly remains strong, supported by a consistent supply of properties in this segment.

Segmentation by Home Type

The Philadelphia housing market displays unique characteristics based on price segments:

• Single-family homes priced below $330k: The demand index recorded 73, showing improvements from last month but marking a significant decline of 14% year-over-year. Unfortunately, with only 1.7 months of inventory, options remain limited, constraining buyers.
• Homes between $330k and $740k have seen a minor uptick to 77, signaling consistent buyer activity. The 1.5 months supply reflects a competitive atmosphere, pushing prospective buyers to act swiftly to secure suitable homes.
• Luxury homes priced above $740k experienced a decline in buyer interest, with an index falling to 73, indicating cooling demand. Buyer caution in this segment may stem from affordability concerns and changing preferences among affluent buyers.

Condominiums and Townhomes

An equally important aspect of the Philadelphia housing market in 2024 involves condominiums and townhouses:

• Entry-level condos priced below $395k surged to 86, indicating a robust but cautious interest. The increase in sales alongside elevated inventory reflects a readiness among buyers to engage, even amid tight stock levels.
• Luxury condos above $395k maintained a Steady pace at an index of 104, showcasing resilience and demand stability in this segment. The inventory also increased to 4.7 months, enhancing buyer choices.
• Townhouses, rowhouses, and twin homes fared slightly better, with an index improving to 87. Inventory issues persist, but recent upticks in interest suggest potential growth in this popular segment.

Regional Selling Patterns

Examining buyer interest across the metro area reveals both stability and challenges:

• In Montgomery, New Castle, Bucks, and Delaware counties, homebuyer interest remains Steady, implying a balanced engagement in the market. Contrarily, parts of New Jersey, alongside specific counties, exhibit Limited buyer interest, indicating regional variability.
• A closer look at central locations shows changes in preferences and economic factors driving specific markets, causing demand patterns to fluctuate within the metropolitan area.

Conclusion of Current Trends

Despite the challenges posed by economic conditions and shifting buyer sentiment, the Philadelphia housing market in 2024 showcases a resilient spirit. The increase in the Home Demand Index signals gradual recovery, even as various home types exhibit different buyer interests.

As we progress into the latter half of the year, it will be essential to monitor these trends closely. The data indicates a market adjusting to new norms, with a constant interplay between supply and demand shaping the real estate environment.

Philadelphia Housing Market Forecast

Philadelphia, often referred to as the Philadelphia-Camden-Wilmington Metropolitan Statistical Area (MSA), boasts a diverse and robust housing market. The Philadelphia housing market shows a complex outlook for 2024, blending both optimism and signs of potential slowdowns. Here’s a summary based on recent analyses:

• Home Value: The average home value is around $365,902, reflecting a 6.0% increase over the past year – Zillow.
• Pending Sales: Homes are going to pending in about 9 days, indicating a relatively brisk market.

Key Forecast Metrics

• Market Forecast: Experts suggest a modest 0.6% increase in home values over the next year.
• Median Sale Price: Predictions for the median sale price by mid-2024 are around $342,167, with a median list price of $359,633.
• Sale-to-List Ratio: The current sale-to-list ratio stands at 1.000, meaning homes are generally selling at their listed prices, with 50.3% of sales occurring above the list price.

Trends and Predictions

• Some forecasts indicate a 7.2% appreciation in home values in 2024, suggesting continued demand in the market despite broader economic challenges.
• The forecasted drop in mortgage rates to about 6.6% later in 2024 may enhance affordability for many potential buyers, particularly opening possibilities for approximately 4.5 million households.

Potential Risks

While there is optimism for growth, certain economic factors could impact the housing market:

• Economic Uncertainty: Any potential economic slowdown or increase in interest rates could impact buyer confidence and housing demand.
• Local Market Variations: Trends may vary significantly within different neighborhoods and suburbs of Philadelphia.

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. 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 a good opportunity for investors in 2023. 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 beaten 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

Philadelphia's real estate market has garnered attention as a promising avenue for investment due to its affordability. Compared to some other major metropolitan areas, the city offers a range of properties at relatively reasonable prices, making it an appealing prospect for real estate investors.

The affordability factor is further accentuated by the diversity of neighborhoods within the city, each with its unique charm and potential. This affordability opens doors for both seasoned investors looking to expand their portfolios and newcomers seeking their entry into the real estate market. As with any investment, thorough research and a strategic approach are essential, but Philadelphia's accessible property prices present an intriguing landscape for those considering real estate as a financial avenue.

Strong Real Estate Appreciation

Based on the Zillow forecast provided for the Philadelphia housing market, there are indicators of potential opportunities for real estate investors, particularly in terms of strong real estate appreciation. The projected increase in the Philadelphia MSA housing market index values over the specified timeframes suggests a positive trajectory for property values in the region. This could translate to a favorable environment for real estate appreciation, which is a key factor for investors seeking long-term value growth.

However, while the forecast indicates potential appreciation, it's important for investors to consider a holistic approach to their investment decision. Factors beyond market appreciation, such as rental demand, location, property condition, and local economic trends, should also be taken into account. Conducting thorough market research and due diligence is crucial before making any investment decisions.

In summary, the forecast does provide an encouraging outlook for real estate appreciation in the Philadelphia market, which could make it an appealing opportunity for investors. Nevertheless, prudent investors should weigh this information alongside other critical factors to make a well-informed decision aligned with their investment goals and risk tolerance.

Highest Appreciating Philadelphia Neighborhoods Since 2000 (By Neighborhoodscout.com)

1. East Kensington
2. Fishtown – Lower Kensington
3. Fishtown Lower Kensington West
4. N Delaware Ave / N Columbus Blvd
5. Sepviva St / E Dauphin St
6. Port Richmond
7. Cedar Park West
8. Kingsessing North
9. Cedar Park
10. Cedar Park South

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 around $1,300 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 March 2024, the median rent for all bedroom counts and property types in Philadelphia, PA is $1,650. This is -17% lower than the national average. Rent prices for all bedroom counts and property types in Philadelphia, PA have increased by 2% in the last month and have increased by 2% in the last year.

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.