If you are looking at buying real estate in Philadelphia in 2022, you must read until the end. Philadelphia is a seller’s real estate market by all housing indicators. Just like in most markets, there is a huge gap between supply and demand leading to a rapid price appreciation. But a year ago, the housing market in the Philadelphia region was much hotter than it is now.
Despite the fact that both house price appreciation and sales volume are running above their long-term averages, the recent housing data indicates that they have slowed in recent months. Rising interest rates will begin to exert downward pressure on both sales and prices as 2022 progresses. Extremely low inventories have been a major element in supporting fast price growth.
In addition, the recent increase in many Philadelphia property assessments may place additional downward pressure on the city’s home prices. However, the current market is unlikely to significantly cool until the calendar also turns to cooler months. Currently, Zillow’s home price estimate predicts that the regional average house price will climb by 8.7 percent over the next 12 months. This is a big reduction from its previous projection of 12.7 percent a few months ago, which was itself a reduction from its previous forecast of 13.6 percent.
Philadelphia Housing Market Trends 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 2021 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 April 2022 Bright MLS housing data. In the past month, houses in the Philadelphia metro area sold for higher prices and that is mainly due to 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 April 2022, the housing demand in the Philadelphia metro area remained strong. Home prices continue to rise fast in the Philadelphia region, with particularly high price growth among single-family detached homes across the region. There are hints of a shift in market circumstances. The new pending sales activity was down and inventories rose between March and April.
The Bright MLS | T3 Home Demand Index rose to 124, indicating that buyer interest is still “Moderate.” April marked the fourth consecutive increase in the Index following the seasonal low in December. Despite the month-to-month increases, the Index was nearly 14 percent lower than one year earlier as the headwinds of rising prices, decreased affordability and rising mortgage rates likely prevented some would-be buyers from completing a home purchase.
Demand for higher-priced properties remained the strongest in the region. In April, the Index for higher-priced single-family homes increased from 227 to 237. Demand for townhomes remained quite robust in the region, although the Index of 133 in April was slightly lower than in April of the previous year. Low inventory constraints buyer activity. Inventory ranged from 1.1 months for mid-priced single-family houses to 3.1 months for luxury condominiums.
Philadelphia Housing Price Trends (April 2022)
- The median sales price in the Philadelphia region was $325,000 in April 2022, a 10.2% increase over April 2021.
- The region’s median sale price is now $30,000 higher than it was a year ago, and more than $100,000 higher (+45.6%) compared to five years ago.
- Across the region, the fastest price growth was in Kent County (+26.9%), as well as in Burlington County (+18.3%), New Castle County (+16.3%), and Camden County (+14.9%).
Philadelphia Housing Sales & Contract Signings
- According to BrightMLS, in April, the sales activity was down year-over-year in most local markets in the Philadelphia region.
- The exceptions were Montgomery County and New Castle County, where sales were up modestly compared to last April.
- The number of condo sales in the Philadelphia region fell by 13.3% compared to last April.
- It reflects the very strong condo market last spring and a return to a more typical pace of condo sales this year.
- In typical years, the number of new pending sales increases between March and April.
- This year, new pending sales were down 4.3% compared to last month.
- The sharpest month-to-month declines in new pending sales were in Mercer County (-16.1%) and Kent County (-13.9%).
Philadelphia Housing Supply Trends
Inventory levels in the Philadelphia housing market remain extremely low. The number of newly-listed properties fell by 10.9% compared to last year, which is 1,241 fewer listings coming onto the market.
- In April, the number of new listings was up 4.9% compared to the number in March.
- The biggest increase in new listings was among single-family detached properties, with an 11.0% increase.
- Between March and April, the number of month-end active listings increased by 17.6%.
- This is a significantly higher March-to-April inventory bump than would be seen in a typical year.
- The inventory of single-family detached homes in the region increased by more than 25% between March and April.
- The months’ supply of all homes for sale was 1.07 months, down 25.7% from a year ago.
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.
- The median days on market were eight in April, which is unchanged from a year ago, but one day less than in March.
- In April, homes sold the most quickly in Chester County, where the median number of days on market was five.
- Single-family detached homes sold the fastest, with half of all homes in the region selling in a week or less.
- Overall, however, homes are still selling very quickly across the region.
Philadelphia Real Estate Quarterly REPORT
Here’s Kevin Gillen’s latest quarterly report for Q1 2022. 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. The market continues to be strong, but not quite as strong as one year ago.
Philadelphia Home Prices
- The average price of Philadelphia homes rose by 1.1% in Q4 on a quality- and seasonally-adjusted basis.
- This is a significant decrease from the previous quarter’s growth rate of 3.8%.
- Philadelphia’s quarterly house price appreciation rate has been steadily slowing since 2020 Q4 when it peaked at 4.8%.
- On an annual (YoY) basis, house prices in Philadelphia are up an average of 9.0% from a year ago.
- The median house price in Philadelphia is currently $234,000; up 11.4% from a year ago.
- Similarly, the median house price in Philadelphia’s suburbs is currently $328,000; up 6.1% from a year ago.
Philadelphia Home Sales
- Home sales have continued to drop in the suburbs but showed an unusual uptick in the city.
- According to Bright MLS, total home sales volume in the greater Philadelphia metro are down 5.1% from a year ago.
- However, in the city, sales are up 1.6% during the same period.
- The million-dollar sales across the region continue to break new records as there were 413 home sales at a price of one million dollars or more in Q1.
- That is a 28% increase from 323 home sales in the same price bracket a year ago.
Philadelphia Housing Supply
- The supply of homes for sale (inventories) and the average number of days it takes a home to sell (DOM) continues to hit new lows.
- There are currently 6,951 homes listed “for sale” across the Philadelphia metro area.
- Not only is this down nearly 28% from a year ago, but it is well below the region’s historic average of approximately 20,000 homes available for sale in any given month.
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 1.9 months.
- For suburbs, it is 0.8 months’ supply.
- 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.
Day On Market
- In a market that is considered “balanced,” the housing market predicts that the average days on the market (DOM) for a home is 55-70 days.
- In Philly, the average was 29 days, showing a strong favorability to sellers.
Philadelphia Real Estate Market Forecast 2022-2023
What are the Philadelphia real estate market predictions for 2022 & 2023? 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.
Let us look at the price trends recorded by Zillow (a real estate database company) over the past few years. Since June 2012, the typical home value in Philadelphia Metro has appreciated by nearly 58%. For a period of almost three years, from 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 16% 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 76.07%. This amounts to an annual real estate appreciation of nearly 5.82%, which puts Philadelphia in the top 30% nationally for real estate appreciation. In the latest quarter, the appreciation rate has been 6.48%, which annualizes to a rate of nearly 28.56%.
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 until April of 2023 (Zillow Home Value Forecast). 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 13.7% over the past year and Zillow predicts they will rise 8.7% in the next twelve months.
- In the city of Philadelphia, home values have gone up 6.8% over the past year and they will continue to rise in the next twelve months.
- Philadelphia County home values have gone up 6.7% over the past year and they will continue to rise in the next twelve months.
- Bucks County home values have gone up 15.2% over the past year and they will continue to rise in the next twelve months.
- Chester County home values have gone up 15.1% over the past year and they will continue to rise in the next twelve months.
- Delaware County home values have gone up 14.0% 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 2012.
Philadelphia Real Estate Investment Overview 2022
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)
- East Kensington
- Fishtown – Lower Kensington
- N Delaware Ave / N Columbus Blvd
- Fishtown Lower Kensington West
- Sepviva St / E Dauphin St
- Port Richmond
- Stadium District West
- Delaware Ave / Pattison Ave
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 June 2, 2022, the average rent for a 1-bedroom apartment in Philadelphia, PA is $1,446. This is a 12% increase compared to the previous year while studio apartment rents have remained flat. Over the past month, the average rent for a studio apartment in Philadelphia increased by 4% to $1,030. The average rent for a 1-bedroom apartment increased by 3% to $1,446, and the average rent for a 2-bedroom apartment remained flat. The rental market should remain strong.
- The average rent for a 2-bedroom apartment in Philadelphia, PA is currently $1,750. This is a 3% increase compared to the previous year.
- The average rent for a 3-bedroom apartment in Philadelphia, PA is currently $1,875. This is a 1% decrease compared to the previous year.
- The average rent for a 4-bedroom apartment in Philadelphia, PA is currently $2,400. This is a 9% 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.