Philadelphia is still 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 ends. Extremely low inventories have been a major element in supporting fast price growth. But there is no denying that all market indicators point to a slowdown. A cooling housing market also has certain positive aspects such as housing affordability.
If home prices stabilize and allow household incomes to catch up, this is a positive development. Second, as housing is one of the largest sources of household expenditures, a slowdown would also provide significant relief to the recent high inflation rate. Currently, Zillow's home price estimate predicts that Philadelphia house prices will climb by 0.8 percent over the next 12 months ending October 2023. This is a big reduction from its previous projection of 6.2% just three months ago, and 12.0% just six months ago.
Philadelphia Housing Market Trends – November 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 November 2022 Bright MLS housing data. Home sales were already significantly lower than a year ago, and the market deceleration continues. In November, there were 5,201 sales in the Philadelphia metropolitan area, a decrease of 32.8% from the previous year. Since 2015, this is the lowest November sales total. In addition, sales declined 8.7% from October.
New listings are 23.4% fewer than they were a year ago, indicating that sellers are similarly on the sidelines. However, new pending contracts have decreased more rapidly and the median number of days on the market has climbed, indicating that inventory continues to grow.
Despite a slowdown on both the demand and supply sides, the median home price in the Philadelphia region increased by 6.5% in November despite a slowdown in both demand and supply.
Philadelphia Housing Demand Index
The Bright MLS T3 Home Demand Index (HDI) suggests a poor pace of presales in the Philadelphia metropolitan area. November's forward-looking HDI for the Philadelphia metropolitan region was 75, down from 93 a year ago and from 87 the previous month. The median sales price in the Philadelphia metro area was $330,000 in November, which is up 6.5% compared to a year ago.
Home prices continue to rise faster in the Philadelphia region than in other major markets in the Mid-Atlantic. Condominiums saw the largest price gains compared to the prior year rising 12.3%, while single-family and townhomes rose around 7%.
In November, there were 5,201 closed sales in the Philadelphia metro area. Sales were 32.8% lower than a year ago and fell 8.7% between October and November. The pace of sales activity has slowed considerably in the metro area; every county saw a twenty-plus percent decline in home sales this month.
Philadelphia Housing Price Trends
- The median sales price in the Philadelphia metro area was $330,000 in November, which is up 6.5% compared to a year ago.
- Home prices continue to rise faster in the Philadelphia region than in other major markets in the Mid-Atlantic.
- Condominiums saw the largest price gains compared to the prior year rising 12.3%.
- Single-family and townhomes rose around 7%.
- Home prices continued to rise in all local markets with the exception of Philadelphia County, where the median price in November was 1.9% lower than a year ago.
Philadelphia Housing Sales & Contract Signings
- According to BrightMLS, in November, there were 5,201 closed sales in the Philadelphia metro area.
- Sales were 32.8% lower than a year ago and fell 8.7% between October and November.
- The pace of sales activity has slowed considerably in the metro area.
- Every county saw a twenty-plus percent decline in home sales this month.
- New pending sales fell sharply in November, down 35.6% compared to last November.
- Pending sales were also down 14.0% from a month ago.
- New pending sales of townhomes saw the steepest declines, falling 40.6% from last November.
Philadelphia Housing Supply Trends
- At the end of November, there was a total of 10,983 active listings in the Philadelphia metro area.
- It is up 15.7% compared to a year ago.
- Sellers are also holding back across the region, with new listings much lower than a year ago in most jurisdictions.
- The biggest contraction was in Chester County, PA where new listings were down 36.9% compared to last November.
- Fewer new listings and a pullback in new purchase activity have led to an increase in inventory in most local markets.
- Supply increased the most in Kent County, DE, where the number of active listings increased by 27.9% compared to a year ago.
- Delaware County, PA was the only jurisdiction in the Philadelphia metro area where inventory declined year-over-year.
- The months’ supply of all homes for sale was 1.59 months, up 33.6% from a year ago.
Median Days on Market
- The median days on market in the Philadelphia metro area held at 13 days for the second month in a row.
- The median days on market were two days longer than a year ago.
- In a “balanced” market, the average days on market (DOM) for a home is between 60 and 70 days.
- 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 Q3 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 fell by 1.8% in Q3 on a quality and seasonally adjusted basis.
- This is the largest quarterly decline in eight years.
- Philadelphia’s house prices still remain higher than a year ago but have significantly decelerated in their price growth.
- The city’s general level of house prices is up only 5.9% from one year ago (YoY).
- That is a substantial drop from just three months ago when they were up 12.7% from one year ago.
- This result is corroborated by Zillow, which reports that Philadelphia’s house prices are currently up 5.8% YoY.
- Philadelphia’s general level of annual house price appreciation has fallen into the single digits for the first time since Covid.
- From 2020 to 2022 Q2, annual house price growth averaged 12.1%.
- The median house price in Philadelphia fell by 4.2% in Q3.
- Currently, the median house price in Philadelphia is $230,000, compared to $240,000 in the previous quarter and $235,000 one year ago.
Philadelphia Home Sales
- Million-dollar home sales in Philadelphia also dropped in Q3.
- There were 79 home sales at a price of one million dollars or more in Q3 of this year.
- This is down 17% from 95 such sales in the previous quarter.
- Home sales activity has also plummeted significantly, although it still remains above average.
- 5,600 houses transacted under arms-length conditions in Q3.
- This is a 35% decline from the city’s record high (since 1980) of 8,655 sales in Q1 of this year.
- Like prices, sales activity typically cools from spring to summer.
- But this is an atypically large decline.
Philadelphia Housing Supply
- Inventories appear to be rising.
- According to Bright MLS, there are currently 5,005 houses listed for sale in Philadelphia.
- While this still is below Philadelphia’s average of approximately 6,000 homes, it is up a whopping 72% from the city’s all-time low of 2,910 in February of this past year.
Philadelphia Real Estate Market Forecast 2022-2023
What are the Philadelphia real estate market predictions for 2022 & 2023? The 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.
NeighborhoodScout.com has recorded similar growth as their data also shows that in the past ten years, Philadelphia real estate appreciated by nearly 81.12%. This amounts to an annual real estate appreciation of nearly 6.12%, which puts Philadelphia in the top 40% nationally for real estate appreciation. In the latest quarter tracked by them (2022 Q1 – 2022 Q2), the appreciation rate has been 2.09%, which annualizes to a rate of nearly 8.62%.
Zillow continues to dramatically downgrade its forecast for Philadelphia house prices. Zillow is currently forecasting that the general level of house prices in the Philadelphia area will grow by only 0.7% over the next 12 months. It had previously forecast annual growth of 6.2% just
three months ago, and 12.0% just six months ago.
Here is the latest housing forecast for Philadelphia, Greater Philadelphia until October 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 9.9% over the past year.
- Zillow predicts they will rise 0.8% in the next twelve months.
- Typical Home Values: $339,119
- 1-year Value Change: +9.9% (October 31, 2022)
- 1-year Value Forecast: +0.8% (October 31, 2023)
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 December 11, 2022, the average rent for a 1-bedroom apartment in Philadelphia, PA is $1,500. This is a 6% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Philadelphia increased by 2% to $1,175. The average rent for a 1-bedroom apartment increased by 3% to $1,500, and the average rent for a 2-bedroom apartment increased by 1% to $1,725.
- The average rent for a 2-bedroom apartment in Philadelphia, PA is currently $1,725. This is a 1% increase compared to the previous year.
- The average rent for a 3-bedroom apartment in Philadelphia, PA is currently $1,725. This is a 1% decrease compared to the previous year.
- The average rent for a 4-bedroom apartment in Philadelphia, PA is currently $2,195. 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
