The Philadelphia metro housing market is showing signs of continued competition as prices rise and days on the market fall. While the spring market saw a seasonal uptick in activity, it is still not as busy as it would be during a more typical spring, with March sales being down compared to a year ago and significantly lower than before the pandemic.
However, the region's housing market is picking up this spring, and the Bright MLS T3 Home Demand Index suggests that the housing market will stabilize and gather steam in the second half of 2023. This article will examine the March 2023 market report for the Philadelphia metro area, analyzing key findings such as closed sales, median price growth, days on the market, and the Bright MLS T3 Home Demand Index, and provide insights into the current market outlook.
March 2023 Market Report: Philadelphia Metro
The Philadelphia metro housing market had higher closed sales, more showing activity, and homes selling more quickly in the spring market of 2023. However, the market is still cooler than normal, and March sales were down compared to a year ago and significantly lower than before the pandemic. The Bright MLS T3 Home Demand Index (HDI) shows that the market saw another monthly gain from its Limited classification in January, and the index for the Philadelphia metro area was 83 in April, indicating Slow market conditions, but this is up for the third month in a row.
Key Findings:
- March sales were down compared to a year ago and were also significantly lower than before the pandemic.
- The median days on market took a dive from roughly 3 weeks in January and February 2023 to 13 days in March.
- New pending sales in March 2023 in the Philadelphia metro area were 25.4% lower than March 2022.
- The median price rose 5.5% year-over-year, the fastest price growth among the major metro areas in the MidAtlantic.
- Inventory in the Philadelphia metro was less than 40% of what it was in March 2019.
- The forward-looking Home Demand Index suggests that while the housing market is picking up this spring, the typical seasonal bump is smaller this year than it was a year ago.
Philadelphia Housing Market Outlook:
The pace of home price appreciation is higher in the Philadelphia metro area than it is in many other regions, and buyers face a limited number of options, with homes selling quickly. The housing market will be more subdued than it has been in the past two years as inventory remains low and mortgage rates are elevated. The spring housing market will see variation across local markets, with stronger demand and price growth in some counties and slower activity in others. The housing market likely will stabilize and gather steam in the second half of 2023.
Competition Heats Up as Prices Rise and Days on Market Fall:
Although the housing market is still not as busy as it would be during a more typical spring, there are signs of competition in the market. The median days on the market were 13 days in March, indicating competitive times for many buyers. Median sale price growth is not stopping in the Philadelphia metro, and the median price in the region was $324,995, up 5.5% compared to a year ago. Tight supply is the primary reason home prices are still rising, and new listing activity has been lower than a year earlier for 12 months in a row.
Hence, we can see that the Philadelphia metro housing market is still recovering from the pandemic's impact, with March sales lower than before the pandemic. However, there are signs of competition in the market as prices rise and days on the market fall. The market outlook for the rest of 2023 is optimistic, with the housing market likely to stabilize and gather steam in the second half of the year. Buyers face a limited number of options, and homes are still selling quickly, so it's essential to work with a knowledgeable real estate agent to navigate the market successfully.
Philadelphia Real Estate Market Forecast 2023-2024
What are the Philadelphia real estate market predictions for 2023? NeighborhoodScout.com has recorded similar growth as their data also shows that in the past ten years, Philadelphia real estate appreciated by nearly 83.01%. This amounts to an annual real estate appreciation of nearly 6.23%, which puts Philadelphia in the top 40% nationally for real estate appreciation.
According to Zillow's data, the Philadelphia real estate market is currently experiencing a steady rise in home values. As of March 31, 2023, the typical home value in the Philadelphia-Camden-Wilmington area is $327,609, which reflects a 6.1% increase over the past year. Additionally, the median sale to list ratio as of February 28, 2023 is 1.000, and the median time to pending is around 11 days.
The real estate market is expected to see a modest growth of 1.1% from March 2023 to March 2024. This forecast takes into account the current trends in the local housing market, as well as economic factors and broader national trends. While this may seem like a small increase, it's important to note that the Philadelphia real estate market has been steadily growing over the past few years and is expected to continue to do so in the future. Additionally, with a median sale-to-list ratio of 1.000 and only 11 days to pending, it's clear that the demand for homes in the area remains high.
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 2023. 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
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 10% price increase in the last twelve months (October 31, 2022), and they expect prices to go up in 2023 by 0.8%. The months' supply has shrunk to 1.59 months as of November 2022.
One of the best investment opportunities in the Philadelphia housing market is those areas you already know everyone wants to live in. 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)
- Fishtown – Lower Kensington
- East Kensington
- N Delaware Ave / N Columbus Blvd
- Fishtown Lower Kensington West
- Sepviva St / E Dauphin St
- Port Richmond
- Greenwich
- Delaware Ave / Pattison Ave
- Stadium District West
- Riverfront
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 April 2023, the average rent for a 1-bedroom apartment in Philadelphia, PA is $1,550. This is a 9% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Philadelphia increased by 6% to $1,246. The average rent for a 1-bedroom apartment increased by 11% to $1,550, and the average rent for a 2-bedroom apartment increased by 2% to $1,800.
- The average rent for a 2-bedroom apartment in Philadelphia, PA is currently $1,800. This is a 3% increase compared to the previous year.
- The average rent for a 3-bedroom apartment in Philadelphia, PA is currently $1,950. This is a 4% decrease compared to the previous year.
- The average rent for a 4-bedroom apartment in Philadelphia, PA is currently $2,300. This is a 0% increase compared to the previous 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.
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.
In 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.
References
- https://www.brightmls.com/
- https://drexel.edu/lindyinstitute/initiatives/housing-reports/
- https://www.zillow.com/Philadelphia-pa/home-values
- https://www.neighborhoodscout.com/pa/philadelphia/real-estate
- https://www.realtor.com/realestateandhomes-search/Philadelphia_PA/overview
- https://www.phillymag.com/property/2020/12/24/2020-2021-real-estate-trends/
- https://www.realtytrac.com/statsandtrends/pa/philadelphia-county/philadelphia
- https://www.inquirer.com/real-estate/housing/home-equity-underwater-philadelphia-attom-20200211.html
- https://en.wikipedia.org/wiki/Demographics_of_Philadelphia
- https://www.mashvisor.com/blog/philadelphia-real-estate-market-2018-invest
- http://worldpopulationreview.com/us-cities/philadelphia-population
- https://en.wikipedia.org/wiki/List_of_colleges_and_universities_in_Philadelphia
- https://billypenn.com/2018/06/29/why-your-philly-airbnb-wont-get-shut-down
- https://www.avail.co/education/laws/pennsylvania-landlord-tenant-law
- http://www2.philly.com/philly/news/eviction-just-cause-bill-housing-curtis-jones-20180214.html
- http://www2.philly.com/philly/business/real_estate/residential/20170122_For_profitable_flipping__few_places_are_hotter_than_Philly_area.html
