Currently, the Philadelphia housing market reflects elements of both, with certain segments favoring buyers while others tilt towards sellers. For instance, entry-level condos maintain a stable demand, offering buyers opportunities in a competitive market. Conversely, luxury properties command stronger interest, providing sellers with favorable conditions for negotiations. Ultimately, the market presents opportunities for both buyers and sellers, contingent upon their respective priorities and preferences.
How is the Philadelphia housing market doing currently?
In March 2024, the Philadelphia housing market is showing signs of steady activity, with a notable rise in the Bright MLS | T3 Home Demand Index for the Philadelphia Metro area. According to recent data, the index surged by 15.2 percent in February, reaching a level of 76, indicative of slow buyer demand.
This increase follows a period of stability from September to December, suggesting a positive shift in market momentum. While several factors contribute to this upswing, including elevated mortgage rates and limited inventory, the overall trend points towards encouraging activity.
How Competitive is the Philadelphia Housing Market?
Buyer interest varies across different segments of the market. Demand for luxury single-family homes experienced the most significant rise, increasing by 35 percent in February. Conversely, interest in entry-level condos remained unchanged, while demand for luxury condos saw notable growth, surpassing that of any other housing type. This imbalance in demand highlights the varying levels of competitiveness within the market, with luxury properties commanding greater attention from buyers.
Are There Enough Homes for Sale to Meet Buyer Demand?
Despite rising demand, concerns persist regarding the adequacy of available homes to meet buyer needs. While the months supply of homes decreased for some segments, such as entry-level condos, it increased marginally for others. Notably, the supply of luxury condos decreased from 9.5 months in January to 7 months in February. However, this fluctuation underscores the ongoing challenge of balancing supply and demand in the market, particularly in high-demand segments.
What is the Future Market Outlook for Philadelphia?
Looking ahead, the market outlook appears promising yet nuanced. While the recent surge in demand suggests a positive trajectory, factors such as mortgage rates and inventory levels will continue to influence market dynamics. Additionally, regional variations in buyer interest further contribute to the complexity of the market outlook. Despite these challenges, the sustained momentum in buyer activity bodes well for the resilience of the Philadelphia housing market.
Philadelphia Housing Market Forecast for 2024 and 2025
Philadelphia, often referred to as the Philadelphia-Camden-Wilmington Metropolitan Statistical Area (MSA), boasts a diverse and robust housing market. With an average home value of $347,371, which has seen a 7.2% increase over the past year, the region offers a promising landscape for both buyers and sellers. According to Zillow, the current forecast predicts a 1.0% increase in the market over the next year, indicating sustained growth and stability.
Key Housing Metrics
For Sale Inventory: As of February 29, 2024, there were 10,621 properties available for sale in the Philadelphia-Camden-Wilmington MSA. This inventory provides buyers with a range of options to consider, contributing to a competitive market.
New Listings: In the same period, there were 3,670 new listings, showcasing ongoing activity and interest in the housing market. These new listings reflect the continuous influx of properties entering the market, catering to the evolving needs of buyers.
Median Sale to List Ratio: With a median sale to list ratio of 1.000 as of January 31, 2024, properties in the Philadelphia area typically sell for their listed price. This ratio indicates a balanced market where sellers and buyers can engage in transactions with confidence.
Median Sale Price: The median sale price in the region stands at $312,400 as of January 31, 2024. This figure provides insight into the average cost of homes sold within the Philadelphia housing market, serving as a reference point for both buyers and sellers.
Median List Price: As of February 29, 2024, the median list price for properties in the area was $305,000. This figure represents the midpoint of all listed prices, offering clarity on the pricing trends within the market.
Percent of Sales Over List Price: Approximately 38.4% of sales in the region were over the list price as of January 31, 2024. This statistic highlights the competitiveness of the market, with a significant portion of properties fetching prices higher than their listed values.
Percent of Sales Under List Price: Conversely, around 43.6% of sales were under the list price during the same period. This metric underscores the variability in pricing strategies adopted by sellers and the negotiation dynamics prevalent in the market.
Understanding the Market Size
Covering a vast area including Philadelphia, Camden, and Wilmington, the Philadelphia-Camden-Wilmington MSA encompasses multiple counties and a diverse range of communities. Its housing market, characterized by its size and variety, plays a significant role in the regional economy. The MSA's housing market is marked by its resilience and adaptability, catering to the diverse needs and preferences of residents across the region.
Are Home Prices Dropping in Philadelphia?
Contrary to a downward trend, home prices in the Philadelphia housing market have been on the rise. The median sale price has seen a 7.2% increase over the past year, reflecting sustained demand and appreciation in property values. While fluctuations may occur in specific neighborhoods or segments of the market, the overall trend suggests a trajectory of growth rather than decline.
Will the Philadelphia Housing Market Crash?
There is currently no indication of an imminent housing market crash in Philadelphia. The market fundamentals, including strong demand, limited inventory, and stable economic conditions, do not point towards a significant downturn. However, it's essential to monitor factors such as interest rates, employment trends, and economic indicators for any shifts that could impact market stability.
Is Now a Good Time to Buy a House in Philadelphia?
Despite the competitive nature of the Philadelphia housing market, opportunities exist for buyers, especially those who are well-prepared and have clear objectives. While prices may be on the higher side compared to previous years, favorable mortgage rates and various housing assistance programs can make homeownership achievable for many. Additionally, buyers willing to be flexible and patient may find success in navigating the market and securing their desired property. Ultimately, whether it's a good time to buy a house depends on individual circumstances, financial readiness, and long-term goals.
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 March 2024, the median rent for all bedroom counts and property types in Philadelphia, PA is $1,650. This is -17% lower than the national average. Rent prices for all bedroom counts and property types in Philadelphia, PA have increased by 2% in the last month and have increased by 2% in the last year.
The monthly rent for an apartment in Philadelphia, PA is $1,600. A 1-bedroom apartment in Philadelphia, PA costs about $1,565 on average, while a 2-bedroom apartment is $1,965. Houses for rent in Philadelphia, PA are more expensive, with an average monthly cost of $1,800.
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