Welcome to a comprehensive overview of the Philadelphia housing market, delving into the dynamics of home prices, emerging trends, and a glimpse into what the forecast holds for the rest of the year and beyond. In this report, we will dissect the market conditions, analyzing the shifts in prices, the impact of affordability challenges, and what prospective buyers and sellers can expect in the coming months. Philadelphia, a city with a rich history and a vibrant present, hosts a real estate landscape that is ever-evolving.
Philadelphia Metro Housing Market Report: October Insights
According to Bright MLS, The Philadelphia metro housing market witnessed dynamic trends in October, showcasing both challenges and opportunities for buyers and sellers. Let's delve into the key takeaways from the latest market report.
1. Active Buyers Amidst Inventory Struggles
Despite the ongoing struggle with inventory shortages, buyers in the Philadelphia metro area remain active and are eager to secure attractive homes swiftly. The market is characterized by a willingness among buyers to make quick offers, driving a competitive landscape.
2. Inventory Trends
Inventory levels continue to present challenges, tracking nearly 10% lower than the previous year. However, there is a silver lining as active listings have seen a consistent increase over the past three months. At the end of October, the region had 10,602 active listings, representing a 3.8% rise compared to September.
3. Price Pressure and Growth
Limited inventory exerts pressure on prices, and the median price in Philadelphia surged to $350,000 in October. This reflects a robust 7.7% annual growth, marking the fastest increase since August 2022.
4. New Pending Sales
In October, there were 5,622 new pending sales, only slightly lower than the previous year, with a marginal decline of 1.4%. This marks the smallest year-over-year decline in new pending sales observed throughout the year.
Buyer Demand and Trends
The Bright MLS T3 Home Demand Index sheds light on the dynamics of buyer interest and activity in the Philadelphia metro area.
1. Rebounding Demand
Despite a rebound in the Bright MLS T3 Home Demand Index, the market still indicates slower conditions. The Index, at 64, reflects a 28% increase over the month, indicating a limited pace of buyer activity. However, compared to the previous year, the Index remains 26.4% lower.
2. Varied Buyer Interest
Buyer interest in different types of homes varied in October. Entry-level single-family homes saw the most significant increase, rising by 50%, followed by a 40% increase for entry-level condos. Luxury condos, while showing a marginal decrease in the Index, exhibited stronger demand compared to other segments.
3. Geographical Trends
Buyer interest was slower in the suburban counties, including Bucks, Delaware, Kent, Montgomery, and New Castle. However, across the Greater Philadelphia area, 14% of communities showed high or moderate demand, a slight increase from the previous month.
Segmented Analysis of Buyer Interest
Breaking down buyer interest by home segments provides a more nuanced understanding of the market.
1. Entry-Level Single-Family Homes
Interest in entry-level single-family homes surged in October, with the Index increasing by 50% to 63. This level is consistent with a limited pace of buyer interest, although it represents a 32% decline from the previous year.
2. Mid-Market Single-Family Homes
The Index for mid-market single-family homes increased by 33% in October, reaching 60 and indicating a limited level of buyer interest. The months supply of homes was 1.7, up from 1.5 months in September.
3. Luxury Single-Family Homes
Buyer interest in luxury single-family homes, reflected by a 31% increase in the Index to 59, remains limited. The months supply for this segment was 2.9, up from 2.6 months in September.
Overall, the Philadelphia Metro Housing Market in October paints a picture of a resilient market with active buyers, price growth, and varied demand across different home segments.
Philadelphia Housing Market Forecast 2023-2024
What are the Philadelphia real estate market predictions? NeighborhoodScout.com has recorded similar growth as their data also shows that in the past ten years, Philadelphia real estate appreciated by nearly 86.19%. This amounts to an annual real estate appreciation of nearly 6.41%, which puts Philadelphia in the top 40% nationally for real estate appreciation.
Delving into the projections and insights for the Philadelphia-Camden-Wilmington housing market, Zillow's analysis provides a glimpse into what the future holds for potential buyers and sellers. This comprehensive forecast, based on data available up to August 31, 2023, sheds light on anticipated trends in home values, market conditions, and the outlook for the upcoming year.
Current Market Overview
As of the latest data, the average home value in the Philadelphia-Camden-Wilmington area stands at approximately $346,484. This figure represents a 4.1% increase over the past year. Properties in this region typically go to pending in around 8 days, reflecting a brisk pace in the market.
Key Sales Statistics
For the most recent data available (July 31, 2023), the median sale to list ratio is 1.004, indicating a well-balanced market. Approximately 52.6% of sales were over the list price, while 31.2% were under the list price. The median days to pending, as of August 31, 2023, is 8 days.
Market Forecast for Philadelphia-Camden-Wilmington (Aug 2024)
Looking ahead to August 2024, Zillow's forecast for the Philadelphia-Camden-Wilmington area predicts a positive trajectory. The forecast suggests a 4.4% increase in home values over the next year. This indicates a continued growth trend in the real estate market for the upcoming months.
Addressing Common Questions
1. Are Philadelphia home prices dropping?
Based on the current data and the one-year market forecast, Philadelphia home prices are not expected to drop. The forecast suggests a 4.4% increase in home values by August 2024, indicating a positive outlook for the market.
2. Is it a buyers or sellers market in Philadelphia?
With a balanced median sale to list ratio of 1.004, the Philadelphia housing market appears to be in equilibrium, offering opportunities for both buyers and sellers. This equilibrium suggests a market where neither buyers nor sellers hold a distinct advantage.
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. 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)
- East Kensington
- Fishtown – Lower Kensington
- Fishtown Lower Kensington West
- N Delaware Ave / N Columbus Blvd
- Sepviva St / E Dauphin St
- Port Richmond
- Cedar Park West
- Kingsessing North
- Cedar Park
- 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 November 2023, the average rent for a 1-bedroom apartment in Philadelphia, PA is $1,500. This is a 0% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Philadelphia decreased by -3% to $1,197. The average rent for a 1-bedroom apartment decreased by -2% to $1,500, and the average rent for a 2-bedroom apartment decreased by -2% to $1,749.
- The average rent for a 2-bedroom apartment in Philadelphia, PA is currently $1,749. This is a 3% increase compared to the previous year.
- The average rent for a 3-bedroom apartment in Philadelphia, PA is currently $1,895. This is a 6% increase compared to the previous year.
- The average rent for a 4-bedroom apartment in Philadelphia, PA is currently $2,200. 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
