Even though Philadelphia was hit heavily by the pandemic, recent data shows us that it's recovering slowly. The spring market, for example, experienced a slight increase in activity, and while it wasn't as active as other spring seasons, it's still doing relatively better.
Is the Philadelphia metro area (and surrounding suburbs) expected to stabilize during 2023? What can real estate investors expect from this city? This page has all the answers.
Here, we'll evaluate the Philadelphia real estate market in an effort to help you determine if getting an investment property this year is recommended. We'll take a look at current home prices, inventory, and other important metrics you should keep in mind.
Current Trends in the Philadelphia Housing Market
According to data from Redfin, the Philadelphia housing market saw a huge increase in activity in March 2023, although it started to slow down again after April. Overall, we can consider the housing market in this city to be slightly competitive, as sellers have more control over the market. However, buyers still have a few opportunities to negotiate better prices.
Let's look at general trends that have affected the housing market in Philadelphia over the past few months:
Median Sale Price
The median sale price for homes in Philadelphia got down to $250K; a 9.07% decrease compared to last year's home prices.
Furthermore, the median listing home price was $264.6K, and the price per square foot was $200. Here, we can see that the market is fairly balanced compared to other big cities.
Number of Homes Sold
This is one of the areas where we'll see the biggest difference. In Philadelphia, there were 1,241 homes sold in April 2023, which implies a 28.6% decrease from last year. In April 2022, there were about 1,739 homes sold.
What this piece of information tells us is that homes are taking longer to sell, so you can expect prices to get lower.
Median Days on the Market
Following up on what we said above, on average, homes in Philadelphia take 15 more days to sell than last year. Today, the average home in the city sells after 48 days.
The sale-to-list price in Philadelphia is 97.1%. While it implies that the market is considerably balanced, it also means that both buyers and sellers are having more room to negotiate better deals.
In April 2023, 21% of homes sold above their listing price, whereas 28.8% of homes sold below that. You could argue that buyers are starting to get more negotiation power as the market stabilizes.
What Can Affect the Local Housing Market Today?
The past few years have been rough for Center City and other popular neighborhoods in Philadelphia, as several factors are currently affecting the market. Still, remember that these factors aren't exclusive to Philadelphia and can also affect other cities.
Here's an overview of common factors that tend to affect a real estate market, including Philadelphia's:
This piece of information can help you see which groups of people are currently buying properties in an area.
While demographics may help sellers create a more effective marketing strategy tailored to popular people groups, buyers may also use that information to their advantage when negotiating.
Demographics, overall, are measured based on gender, age, income, race, and other factors.
Government Policies and Intervention
Different kinds of taxation, interventions, decisions, or other policies from a government can affect a real estate market. The effect will depend on the type of intervention and whether it was local, regional, or national.
Rising Mortgage Rates
Mortgage rates are one of the primary reasons why real estate markets across the country aren't recovering at a faster pace.
Overall, the Federal Reserve keeps raising rates to fight inflation, and while it's doing it at a slow pace to avoid affecting people too much, it's still causing trouble for those in the real estate market.
When rates keep rising, sellers may hold off from selling or increase the cost of the property to offset those extra expenses when they buy another property. On the other hand, some buyers may be waiting for rates to come down in an effort to save money.
Since the Philadelphia market is still relatively affordable in comparison to other areas in the U.S., some buyers may not have too much trouble dealing with these rising rates. Others, on the other hand, may want to wait until rates get lower, although it's hard to know when that will happen.
Supply and Demand
Something that has kept property values in Philadelphia from plummeting is the supply/demand ratio. Even though we can argue that the housing market in the city is balanced for the most part, there's still a lower inventory compared to the current demand.
This can also cause more competition among available buyers, which can be a problem for those looking for affordability. As of today, the market is still considered a seller's one, although buyers are now getting more opportunities to negotiate.
Will the Real Estate Markets in Philadelphia Crash in 2023?
Even though Philadelphia's market is still considered to be in a tough place, it's nowhere near crashing. Here's a brief overview of what will likely happen over the following months:
You can expect the market to be slower than usual, as its currently stabilizing after the pandemic. On the other hand, interest rates may have taken a few buyers off the market, but considering how it's behaving today, you can expect some of those people to come back. There are more opportunities for those willing to invest.
Philadelphia, overall, has a lower cost of entry compared to other markets in the country, so if you're looking to invest with affordability in mind, this city may be a good place to start.
Another essential factor to consider is that, while prices are still going down, it's not likely for them to keep declining indefinitely. This is because the housing supply is still low compared to the demand, which provides control to sellers.
To summarize, you can expect the market to slow down for a while longer, but it's not going to crash.
Key Statistics About the Philadelphia Housing Market
Here are other statistics you may find helpful surrounding the Philadelphia real estate market:
- Approximately 80% of buyers in Philadelphia are looking to stay within the metro area, as of April 2023.
- About 10% of homes in the city are at risk of flooding.
- Rittenhouse is considered the most expensive neighborhood in Philadelphia with a median price of $749.9K.
- On the contrary, Haddington, with a median price of $145K, is considered the most affordable neighborhood in the area.
- According to data from Roofstock, home prices in the city have increased by almost 58% over the past five years.
- The cost of living in Philadelphia is at least 4% higher than the current national average, according to data from RentCafe.
Market Predictions for the Real Estate Market in Philadelphia
Taking all of this into account, what can you expect from the Philadelphia housing market in the future? Even though the outlook may not seem as good considering previous data, we can argue that the market is recovering.
The spring market saw a huge increase in activity, particularly during March 2023. Although the market got back to "normal" recently, there are still signs that it's doing better than in 'pandemic times.'
You can expect the market to keep growing at a slow pace over 2023. Demand for homes in the city is still high, and inventory remains low, so there's still competition among different homebuyers.
There are other reasons why Philadelphia's real estate market may be attractive for investors. Let's look at some of them:
Compared to other cities, Philadelphia's real estate is more affordable. You can expect prices to vary depending on the neighborhood and how popular it is, but if you do proper research, you will surely find an amazing property for a reasonable price.
If you invest in those "desirable" areas in Philadelphia, you could get an amazing return on your investment in the future, as prices are likely to increase slightly during the year. Something to keep in mind is that the rental market in Philadelphia is popular.
To put things in perspective, about 48% of homes in the city are rented, whereas the other 52% are owner-occupied. This means that there are equal opportunities for both types of investors. If you were to rent the property, then you could rest assured you would get a good ROI.
Philadelphia hosts a decent amount of universities and educational institutions, making it desirable for students who want to find a rental home. You can use this to your advantage if your goal is to rent your property. Also, keep in mind that Philadelphia is considered landlord-friendly, so you would have the upper hand most of the time.
With a recovering economy and job market, you can expect Philadelphia to be an excellent place to invest in. However, if you're looking for affordability, then you may want to make your purchase until prices get higher later in the year.
Even though demand is high, you can expect to find plenty of opportunities to find proper housing at an affordable price. All you have to do is be prepared to negotiate and beware of potential bidding wars in 'hot' areas.
To summarize, the market in Philadelphia is expected to remain stable in 2023 with small signs of growth. Both buyers and sellers will have negotiation power with certain properties, which makes the market keep growing.
Should real estate investors consider Philadelphia? It depends on how you look at the city.
Many people consider Philadelphia "old," but if you look at it from another perspective, you'll find there are many reasons why the market could still be appealing to certain investors.
Philadelphia is the largest city in Pennsylvania, which is something important to note. Furthermore, despite the negative effects the pandemic had on the city, the population is growing slowly, which could also make the market more attractive for everyone.
Is the Philadelphia Housing Market Slowing Down?
Generally speaking, sales in Philadelphia are slowing down, which is making home prices go lower. Many people consider prices in Philadelphia to be too high considering recent trends; overall, prices are higher than before the pandemic, and interest rates keep going up, making people less likely to negotiate a transaction.
However, the demand is still considerably high when compared to the current supply, so some sellers have been lowering their prices to get investors interested again despite the rising rates.
In essence, the market in Philadelphia is slow but picking up the pace as the months go by. You can expect prices to increase slightly during 2023, which may increase competition among buyers.
Is Philadelphia Real Estate Overvalued?
Even though Philadelphia was often considered an overvalued market, today, it's more affordable than many other major cities in the country. However, some people still consider home prices in the city to be overvalued, as mortgage rates are still high and inventory remains low.
What's the Outlook for Real Estate in Philadelphia for 2023?
Most homes in Philadelphia still get many offers from potential buyers, which drives up competition. According to Redfin, 'hot' homes can go pending in about 17 days, which implies there's still interest in the market.
Unfortunately, the low supply of housing in the city has made it harder for buyers to find many options to invest in, although recent data suggests that the market could stabilize over the following months and bring more opportunities to them.