The current data suggests that the Philadelphia housing market leans towards a buyer's market, as indicated by the Limited and Slow levels of buyer interest across various housing segments. The data indicates challenges in the market, such as declining demand and higher mortgage rates. However, the term “crash” implies a severe downturn, which is not explicitly supported by the current market trends. Continuous monitoring is essential to assess any potential market shifts.
How is the Philadelphia housing market doing currently?
In January 2024, the Philadelphia housing market faced a notable decline in demand, as indicated by the Bright MLS | T3 Home Demand Index. The overall index for the Philadelphia Metro area decreased by 23.4 percent, reaching a level of 49, consistent with limited buyer demand. This decline marked the fourth consecutive month of limited demand, with the index being 14 percent lower compared to the same period the previous year.
Segmented Demand
The demand for various types of homes in the Philadelphia Metro area exhibited variations. Luxury single-family homes experienced the most significant drop, plummeting by 41 percent to a demand index of 29, placing it firmly in the limited category. However, entry-level condos, while still in the limited category, showcased stronger buyer interest compared to other segments.
Demand by County
Buyer interest was in the limited category across all Philadelphia Metro area counties, with Kent and New Castle counties showing the strongest demand. Conversely, the New Jersey portion of the metro area experienced the weakest demand. In the Greater Philadelphia area, 90 percent of ZIP codes witnessed limited demand, reflecting an increase from 75 percent in November.
Market Trends
The overall trend in the demand index has been decreasing since April, with the most recent decline attributed to the expected seasonal slowdown at year-end and ongoing buyer affordability concerns, despite some relief from lower mortgage rates.
Segment-Specific Insights
Entry-Level Single-Family Homes
The Bright MLS | T3 Home Demand Index for entry-level single-family homes decreased by 24 percent in December, reaching a limited level of buyer interest. The index was 25 percent lower compared to the previous year. However, the months supply of homes saw a slight decrease from 2.1 months in November to 1.9 months.
Mid-Market Single-Family Homes
The index for mid-market single-family homes remained in the limited category, experiencing a 27 percent decrease over the month. The months supply, at 1.6, was lower than any other type of home in the metro area and down from 1.8 months in November.
Luxury Single-Family Homes
Demand for luxury single-family homes remained in the limited category, falling by 41 percent in December. The index was 17 percent lower compared to the previous year, with the months supply at 2.3, down from 3.3 months in November.
Entry-Level Condos
Demand for entry-level condos was down by 20 percent in December, reflecting a limited pace of buyer interest. Despite the decline, the index at 60 was still higher than any other type of metro area home. There was a 2.9 months supply of homes available for sale, up marginally from the previous month.
Luxury Condos
Buyer interest in luxury condos witnessed a significant decline, with the index falling by 21 percent in December. The limited pace of demand was reflected in an index of 59, and there was a 9.9 months supply of homes available for sale, up from 6.5 months in December.
Philadelphia Housing Market Forecast for 2024 and 2025
According to Zillow, a reputable source in real estate data, the average home value in Philadelphia-Camden-Wilmington stands at $343,102, reflecting a significant 6.7% increase over the past year. Homes are swiftly moving into the pending status within an average of 16 days. Let's delve into the various housing metrics that contribute to shaping the forecast for this market.
The Philadelphia-Camden-Wilmington Metropolitan Statistical Area (MSA) encompasses various counties, contributing to its diverse housing market. The MSA is a key economic and cultural hub, with a housing market that plays a significant role in shaping the overall regional dynamics.
Housing Metrics Explained
For Sale Inventory
As of January 31, 2024, there are 11,146 properties listed for sale in the Philadelphia-Camden-Wilmington region. This inventory plays a crucial role in determining the options available for potential homebuyers.
New Listings
In the same timeframe, 3,516 new listings have entered the market, indicating a continuous flow of properties becoming available for prospective buyers.
Median Sale to List Ratio
Reflecting the market dynamics as of December 31, 2023, the median sale to list ratio stands at 1.000. This ratio is an important indicator of how closely homes are selling to their listed prices.
Median Sale Price
As of December 31, 2023, the median sale price for homes in the Philadelphia-Camden-Wilmington area is $318,467. This figure provides a baseline for understanding the price range in the market.
Median List Price
As of January 31, 2024, the median list price is $306,333. This metric helps potential buyers gauge the expected cost when considering a home purchase.
Percent of Sales Over and Under List Price
Examining the data from December 31, 2023, 41.8% of sales were over the list price, while 40.3% were under the list price. This insight provides a glimpse into the negotiation dynamics between sellers and buyers in the market.
Market Forecast
Looking ahead to January 31, 2024, the market forecast suggests a positive trend with a projected 4.3% increase. This forecast is a valuable tool for both buyers and sellers in anticipating the direction of the real estate market in the coming year.
Are Home Prices Dropping in Philadelphia?
Contrary to a drop in home prices, the Philadelphia-Camden-Wilmington housing market is witnessing an upward trajectory. As of December 31, 2023, the median sale price sits at $318,467, indicating a healthy market where prices are not experiencing a decline. This stability provides assurance to both buyers and sellers regarding the overall value of properties in the region.
Will the Philadelphia Housing Market Crash?
Based on the current data and the 4.3% positive market forecast for January 31, 2024, there are no indications of an imminent housing market crash in the Philadelphia-Camden-Wilmington area. The market appears resilient, with steady growth projected for the coming year. However, it's important to monitor economic factors and external influences that could impact the real estate landscape.
Is Now a Good Time to Buy a House in Philadelphia?
Considering the current market dynamics, determining whether it's a good time to buy a house depends on individual circumstances and goals. While the market favors sellers with rising home values, buyers can still find opportunities, especially with the forecasted 4.3% increase. It's advisable for potential buyers to act strategically, leveraging the available data and market conditions to make well-informed decisions.
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 February 2024, the median rent for all bedroom counts and property types in Philadelphia, PA is $1,665. This is -12% lower than the national average. Rent prices for all bedroom counts and property types in Philadelphia, PA have decreased by 4% in the last month and have increased by 4% 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.
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