Philadelphia Real Estate Market
If you want to buy or sell a home in Philadelphia in 2022, it is worth mentioning that the market is all over the place. However, sellers need to be more cautious of the market because prices have risen for some types of homes in a couple of places but have fallen too. This data isn’t reflected in so-called median sales price data.
Philadelphia is a city where many people obviously want to live. However, there is a gap between supply and demand, with rapid price appreciation not making things any easier but most of this appreciation is centered around the Philadelphia metro area. That said when compared to the previous year’s 2020 and 2021, the market isn’t as hot now. In fact, some homeowners are struggling to sell depending on where they are located.
If you want to buy real estate in Philadelphia it is worth reading to the end of this article. Sure, the news will tell you that it is a seller’s market, and they may be right but not across the city. The housing market indicators are all over the place, which is why both buyers and sellers need to do their research.
Even though on average housing prices have appreciated with sales volumes above the long-term averages, recent data shows that things have slowed down recently. The rising interest rates are about to start exerting downward pressure soon on both the sale price and purchasing power of potential buyers. While we think that low inventories will help keep prices higher, many are forecasting that there will be many more people bailing out of their investment properties. It could potentially turn what many people consider to be one of the hottest real estate markets into one that’s freezing cold.
The other factor we think will put downward pressure on is Philadelphia property assessments. However, we will not see the housing market crash and no expert beyond a few fringe economists is saying it will crash. That said things may cool down as we head into winter 2022. It could also mean that we see a more balanced real estate market moving forward. We feel the market will soften and the time it takes to sell increases, which in turn could drive prices down. This also is a problem for those trying to sell fast Philadelphia because they are divorcing, avoiding foreclosure, Selling a fire-damaged home, and many other reasons
The current Zillow home price estimates predict the regional average will climb by 8.7% over the next few months. This is a reduction from the previously predicted 12.7 percent a couple of months ago, which was a further reduction from the previously predicted 13.6 percent. While that does not mean there will be more people selling real estate, it does mean that there will be fewer buyers. So, sellers will have to revise their expectations accordingly.
Philadelphia Housing Market Trends After COVID-19
COVID-19 didn’t hit the Philadelphia housing market nearly as hard as many had predicted. Not to mention it rebounded quickly too. However, there are a couple of trends that you should be prepared for that will either come within the third and fourth half of 2022 or even later in 2023.
Right Now It Is A Seller’s Market
We mentioned this earlier and I think it is worth mentioning again that in 2022, Philadelphia has remained a seller’s market in general. Plus, it is one of the hottest markets in the US. In other words, the demand from buyers exceeds those selling or what the market can supply. Not only is Philadelphia, a seller’s market but also nearby counties.
That said the rising mortgage rates may rise even higher in coming years, which could put a damper on this so-called seller’s market.
That’s why regardless, of where your home may be located, the market is going to be pretty good for now. The prices for homes are higher than they were in 2017 and 2018. However, the amount of competition will vary from one county and city to the next. That said there is still a shortage of supply and demand is increasing steadily. All of which are pushing prices higher.
Bright MLS published housing data back on April 22, highlighting that the metro area was the most expensive, where there were houses selling for more. One reason cited is the low inventory and high demand. New listings continue to be low compared to 2021, this has squeezed the housing inventory further, which means sellers are demanding more money than in the past.
The House Demand Index
Demand for homes in Philadelphia Metro continued to remain strong, even with prices growing higher amongst mainly single-family detached homes in the region. Today, we are seeing hints of a shift in that market. Pending sales inventories are down with a slight rise between April and March 2022.
There was a 124-point rise in the Bright MLS | T3 Home Demand Index, which indicated that buyer interest was moderate. We saw the fourth consecutive increase in the index starting in December. However, despite the month-over-month increases in the index, which amounted to around 14 percent than a year earlier we predict that the reduced buying power and higher mortgage rates could mean that the number of buyers dwindles.
Backing up the theory that middle and lower-middle-class buyers are being priced out in Philadelphia’s real estate market is that prices for high-end homes rose. Townhomes continue to be in high demand, despite the 133 indexes in April. Demand is comparatively highest for luxury condos, which means that people with money aren’t fazed by the higher mortgage rates or rising property prices in Philadelphia.
On the other side of the aisle, real estate transactions are lower than they were especially in lower-tier neighborhoods. Largely foreclosed areas remain deserted, with nobody’s interest in buying. the same goes for ones that are far away from easily accessible public transport. That is where there is much more to the data than just rising prices something we’ve learned from years of real estate investing.
Philadelphia Housing Market Forecast For 2022
So, the question most readers are probably asking is what are the real estate forecasts or predictions for the remainder of 2022 and 2023? At present, the market has become pretty unpredictable. Increasing gas prices coupled with higher interest rates could turn away many budget buyers. That means homes in less than perfect condition or those that aren’t in swanky areas may not sell as well.
We predict that there will be a further shake-up in Philadelphia’s housing market. The trend is expected to last for the next few years, but it will continue to remain a hot market in general. The most commonly purchased homes will remain three and four-bedroom row homes, which also happen to be the most commonly available housing units.
Other types of homes available in Philadelphia will include large apartments, duplexes, single-family detached, and homes that are converted to apartments.
Zillow recently published a price trend. Zillow for those who don’t know is a real estate database with a history of recording home prices going back several years. According to the site starting June 2012, the value of a typical home in Philadelphia Metro has appreciated 58%, from 2013 to 2016, the price remained flat. Then from 2016, there is a steep rise in prices, with rates going up by 16% in a single year.
Similar types of growth have been recorded by websites like Neighborhoodscout.com, with data showing an appreciation of around 76%. This amounts to an annual appreciation of 5.82%, putting the city in the top 30% in the US for real estate appreciation. This last quarter prices appreciated by 6.48%, with annual rates of 28.56%.
The figures quoted corroborate that from Zillow’s. In other words, the prices of homes are rising and will continue to rise through 2022 and 2023, or over the next twelve months. Most of the buyers will be made up of first-time home buyers. In addition, it’s expected that there will be a higher inflow of New Yorkers looking for more bang for their buck, which will keep the housing market in Philadelphia moving in the right direction. But these figures and forecasts don’t extend to the entirety of the Philadelphia region that encompasses lower-tier neighborhoods.
Anyone who buys now stands to make a profit within the next year. This means buying in 2022, means that the investor can sell in June 2023, for a significant profit. This makes the business of flipping properties the best it has been in years. However, there is a significant risk too as many factors can cause these forecasts to be thrown out of wack. That is why we err on the side of long-term investments.
Below is a breakdown of how much home prices have gone up in various parts of Philadelphia and nearby counties:
- The Delaware Valley – The price of a home has gone up by 13.7% over the past year, with Zillow predicting an additional 8.7% increase within the following year.
- Philadelphia City – Prices of your average home have shot up by 6.8% in the past year and are expected to continue rising in the next twelve months.
- Philadelphia county – Home prices have increased by 6.7% in the past year. It is expected to continue rising in the following year.
- Bucks County – The value of homes has shot up by 15% on average in the past year. Experts like us believe it will continue to rise next year.
- Chester County – The value of homes has increased by 15.1% in the past year and similar to Bucks County, will continue to rise for the following year.
- Delaware County – The value of homes rose by 14% in the past year and is expected to grow in a similar fashion within the next 12 months.
Housing Market Forecast Philadelphia For Investors
One of the questions a newbie investor will have is: should they invest in the Philadelphia real estate market? Most investors already understand that real estate purchase isn’t a good investment across the United States; there are some places that offer better returns than others.
So, should you invest in Philadelphia real estate? To answer this question, it is essential to dive into the local trends to understand the potential of various markets that make up Philadelphia and what may affect them in the coming months.
It is essential to start by giving investors a bit of background about the Philadelphia real estate market. Most people reading this already know that Philadelphia is one of the oldest and arguably the most significant American cities. However, it has often been written off as too historical, and part of the Rust Belt. In recent years the city has rebounded, and now many experts are predicting that there is an excellent opportunity for investors. After all, Philadelphia is the largest market in Pennsylvania and maybe the second largest on the East Coast. It is also the sixth-largest US city. But there are other reasons why Philadelphia is worthy of investors.
Unlike many other major US cities, Philadelphia is one of the few where the population is growing. The city’s population has grown tremendously over the past seven years, making it the second-fastest-growing county in the region.
So, the next question is, how big is the housing market? Philadelphia is home to over 1.5 million people. It has now become the hub for nearby Delaware Valley and happens to have the sixth-largest metropolitan area in the US. The metro is home to now over six million people. If you, account for Philadelphia and its suburbs, the housing market will make up to four million people. That’s why there is a great deal of variety when it comes to finding investment property.
Philadelphia Real Estate Market and The Propensity for Opportunity
One of the downsides of a market has been that it is thoroughly built up and that means there is no further room for expansion because it is already at its peak. That means the only place to go is up, subdivide or redevelop. Today, the lack of supply, and growing demand, have kept property value strong and rents high.
Like many other large cities, most jobs are in the city center and nearby areas. As an investor, if you can find a property that can be converted into a multi-family home or maybe even luxury housing, there is the prospect of earning a mega return. The right property can help an investor make big money, but you need to be able to predict how the local housing market will shift.
Comparatively Affordable Real Estate
Today, the median selling price for a home in Philadelphia is around $200k. The prices obviously vary depending on what areas are perceived to be the safest and those that are desirable. The fact is that you can still find homes for $40k and $60k for sale, which can be rented out to single mothers, small families with kids, etc.,
There are also condos and older homes that can be renovated and flipped for a profit. However, the profit is moderate with some homes requiring a great deal of work. It is worth noting that in some areas, more than 10% of properties sold are “flipped sales.”
Philadelphia’s Property Market Shows Strong Appreciation
We already mentioned what type of ROI you can expect as a landlord. However, the increasing nature of your property’s value is on the other side of that equation. So, you’d recoup your investment and make money when selling it. Zillow reports that Philadelphia property prices rose by 11 percent in the past year, and the trend is only going to gain momentum through 2022 and 2023. In other words, the value will continue to appreciate significantly in the larger metro area, where supply has shrunk in the past month.
The best properties to invest in are those that you know people want to live in. For instance, a neighborhood like Graduate Hospital is red hot. In addition, we are seeing an increase in demand in zip codes 19118 and 19106, which means that prices will continue to increase in these places.
The exciting thing is that there are a couple of zip codes near the ones we mentioned above which have flatlined and, in some cases, are declining in value. For instance, if you buy property in 19132 and 19125, then expect that value will continue to dive, but these could attract people searching for cheaper homes. A profit will always be made, provided you understand Philly’s real estate market.
Neighborhoods that have appreciated the most in the past 20 years include:
- N Delaware Ave
- East Kensington
- Port Richmond
- Fishtown Lower Kensington West
- Stadium District West
- Pattison Ave
The Philadelphia Rental Market Is Huge
It is worth mentioning that 46% of the homes in Philadelphia are rented out, which is much higher than the national average. If you do the research, it isn’t hard to see that a poor urban population partly drives it, plus, the city has one of the highest numbers of singles and single parents.
The Center City is mainly populated by people who prioritize living near public transit points because that way, they don’t need to buy a car. It is often because they can’t afford to buy a car, which is why they also can’t move out of the center. However, we strongly advise anyone buying to do their legal research because, like all investors, your purchase will be subject to fees and taxes, which aren’t necessarily mandated by Pennsylvania law.
Like every large city, it is home to universities and a large population that rents, including students. In addition, Philadelphia is both a large and an old town, with several educational institutions. At present, there are twenty-four-year universities, with several located across the Center City. Then there are dozens of tech schools and two-year schools in the city. Also present are medical schools and seminaries.
So, how much can you make by renting out a home or apartment? Traditionally, the Philadelphia housing market can net investors around $1300 a month, but the value includes single-family homes, five-bedroom, three-bath luxury homes, and everything in between. The median property value is $200,000; considering this, the property’s cash-on-cash return is around 2.6%. However, you can get more for the property by upgrading the home and catering to a more affluent market for better returns.
In addition to the above, there is another reason your ROI will be higher, which has something to do with the rising rents in the city. Philadelphia’s housing market is estimated at $1400 a month, but it is lower than the surrounding suburbs. So, there is quite evidently room to grow. In fact data from the housing market predicts higher rents in the coming months.
So, what type of rent can you expect to get in Philadelphia? Well, that depends. A 1-bedroom apartment is $1446 on average. This has increased by 12% compared to 2021, while studios have, on average remained flat.
However, in the past month, alone, rents for studios have risen by 4% to an average of $1030. A single-bedroom apartment rose by 3% in a single month. Two bedrooms still command an average of $1446 a month. As it’s quite evident there are people willing to pay more to live in the city, especially in the more affluent or tier 1 areas.
Strong Rental Market Moving Forward
Even though many American cities have waged war against Airbnb and other short-term rental apps, Philadelphia hasn’t. In fact, the city has embraced it, seeing how helpful it can be in catering to tourists and helping local homeowners make money.
That is one reason why Philadelphia stands out as a haven for short-term rental websites. However, there are a couple of conditions that property owners are required to meet, such as paying 8.5% tax on all profits, and the property shouldn’t look like a home. The rules also apply to primary residences. Nonresident landlords can rent out their properties via Airbnb but will need to apply for a visitor accommodation variance. In addition, it is possible to rent out multi-family housing via Airbnb, but your paperwork needs to be in order.
Many people who have not invested in Philadelphia want to know if the city is landlord friendly or if it is instead tenant-friendly. It goes without saying that the state is landlord-friendly. However, the state is stricter than others in some cases. For instance, As early as 2018, the City Council was discussing laws that would limit the number of evictions to ones with Just Cause. It would include failure to pay rent, unruly behavior, and breaching the lease. It is also possible to evict a tenant if you want to renovate the property.
Landlords are required to give tenants an opportunity to accept the new lease or higher rent when renewing instead of evicting them. However, there are many other more landlord-friendly laws. For instance, there is no payment grace period, and limits on late fees. In addition, there aren’t any pet laws.
Perhaps the only drawback is that you need to have a license to buy homes, they will need a housing license and commercial activity license. But renting the property out does not require a license.
Median Sale Price for Less Than Desirable Homes
Now there is the fact that all of the stats above do not reveal the whole story namely the story of less than desirable homes. In other words, these are homes that require anywhere from minor repairs like reroofing to major repairs like fixing problems with the foundation, plumbing, and electricity.
The statics aren’t an accurate representation of homeowners who are trying to sell homes occupied by undesirable tenants and homes in areas that are seen as undesirable. The fact is that the prices of these types of homes have not risen with the values of other houses.
Most real estate agents in Philadelphia don’t even take on clients who want to sell a home they have inherited but are in bad condition, requiring extensive repairs. Many times the homeowner does not have the money for repairs. Other times they just want to get rid of the home because they don’t live in the city or no longer live in the city. Sometimes it is also because they want to move.
You also need to factor in that the time it takes to sell one of these so-called undeniable homes is at least six to eight months, and that is if they ever get an offer. Most investors don’t want to buy homes in less desirable areas because they are harder to flip or turn into profitable Airbnb.
What is your next step if you own one of these undesirable homes? How can you sell the home? One way would be to put it on the market, also referred to as listing it yourself. The problem with that approach is that you may never ever sell the home. Most buyers will try to lowball you by offering less than 40% of its value. Plus, those who make an offer will make it contingent on you spending money on renovations. That is, as we established earlier, it may not be an option for you.
Price Per Undesirable Home Drops Each Year
The price of your home continues to drop each year until and unless you can get it renovated. Also, if it stays on the market too long, it gets a bad rep for being something people are avoiding. Most people who see the listing for the first time will assume there is something very wrong with the property, which is why it has remained on the market for this long.
So, the longer you hold on to the property, the less it will net you. It also reduces your odds of selling it. Fortunately, you can still sell it to a cash-for-home buying company.
Cash home buyers Philadelphia like Home Cash Guys will buy any home in Philadelphia. In fact, we are looking for homes that nobody else wants to touch. As real estate investors, we buy these properties, after which we spend thousands of dollars to make them desirable, stage the property and then sell it. We may also use the property as a rental.
We Offer The Best You Can Get
At Home Cash Guys, we are one of the few cash Home buyers in Philadelphia that make homeowners the best possible offer, all things considered. Our offers are generous and are meant to help you ensure a quick sale instead of watching your property languish on the market.
Selling to us also ensures that you don’t have to spend time negotiating with potential sellers. Also, there is no risk that if you find a buyer by some miracle, their bank refuses to finance their mortgage. This brings us to the point that you don’t have to invest time and effort into the required paperwork too.
It is worth noting that there are a couple of factors that make it highly challenging to sell your home in Philadelphia, some of which we cited above, but they are worth mentioning again:
Rising interest rates – This means that medium and small investors are being priced out of the market. It also means that single families and those who want to buy homes to live in can’t buy as time passes. This reduces the odds of you ever selling a less than desirable home even further.
Nobody wants to spend time and money on repairs – Most people in the market for a home don’t want to spend time and money on the house. Then there is also the risk of the home being unstable, and that’s a risk nobody wants to take. Fixer-uppers are pretty hard to sell in any market.
Older homes are less desirable – Philadelphia is a historic city, and many homes are over a hundred years old. However, ones that have not been updated, with modern facilities, remain undesired and hence low priced. That said, renovating and updating a home can cost upwards of $20k, so not everyone may be able to afford it.
Less than desirable neighborhood – Let’s face it, Philadelphia isn’t perfect. In fact, it has one of the largest neighborhoods dotted with substandard residences. Many of these people are jobless; others sleep on the streets. If your home happens to be near where there are high concentrations of crime and drugs, the odds of selling go down dramatically. Not to mention you’ll never get what the so-called ‘market price’ stats will have you believe.
The home has a history – Many homes in Philadelphia have a history. However, if the history of your home includes crimes like murder, selling it will become immensely more challenging. Not many people want to live in a house that used to be a crime scene.
You need to sell in a hurry – Many homes in Philadelphia sell like hot cakes. However, they have none of the issues like the ones mentioned above associated with them. That’s why putting it on the market means you may have to wait months before even getting an offer. Which means you can’t sell the home in a hurry.
The best way out of this is to sell to a cash-for-home buying company. At Home Cash Guys, we buy homes regardless of the issues above and beyond. Plus, we make an offer in as few as 24 hours. However, we can also close on a date you want, in other words, whenever you want. We can also work out an agreement whereby you sell to us and rent your home back. This is a great way to get an urgent injection of cash to cover urgent expenses without leaving the home you love.
So, if you have a home that you want to sell fast find yourself searching “sell My House Fast Philadelphia” and need urgent cash, we can help you.
If your paperwork is in order, we can put cash in your pocket for the home in less than a week. So, call us today to get a free no-obligation quote.
Philadelphia Real Estate Market – Frequently Asked Questions (FAQs)
Why Am I Getting Low Offers for My home?
Many people come to us asking why their homes are getting low ball offers. The fact is that the offer you get mainly depends on where your home is located and its condition. You can’t expect to get the market price if your home is located in a one-star or two-star neighborhood. The price goes down further if your home needs extensive work. Remember that most buyers are hesitant to buy properties requiring extensive repairs. Also, 80% of those looking for a home are at least looking to move into a three-star neighborhood.
Can I Sell My Philadelphia Home in A Week?
Yes, you can if you sell it to Home Cash Guys. We buy and close most sales within a week. However, putting your home on the market or an MLS sale for a less desirable home can take months, if not over a year. You will also want to brace yourself for a great deal of back and forth, even if you get a good offer. Keep in mind that to close within a week your documentation needs to be in order. Plus, you need to respond to us in a timely manner.
Has The Demand For Old Homes In Philadelphia dwindled?
Yes, while the demand for homes has risen with lowering supply, the demand and all the stats you see are for homes in desirable areas. These are also homes considered in “market” condition. If your home is anything less, there is dwindling demand. Today, even investors who once would invest in such properties are stepping back because of the perceived recession hitting the market.
What are the advantages of selling a home for cash?
The most significant advantage is that you know you’re getting paid. Since we are real estate investors, our purchase isn’t contingent on the mortgage being approved by the bank. Instead, we can pay cash as soon as the offer is accepted and the deal is sealed. This saves you (seller) from extensive back and forth, hoping to get paid.
The other advantage is that our team handles all the paperwork. All you need is to sign on all the places required to transfer the title to us. However, you can and should hire an attorney to represent your interests.
Will cash home buyers back out from a purchase?
The only reason we may back out from a purchase is if your documentation isn’t completed or there are legal issues with the property. For instance, if you don’t legally own the property or if the property has outstanding loans on it. We do our due diligence before buying any home.
Do you charge a commission or a service fee?
Home Cash Guys don’t charge sellers anything. Instead, we are in the business of putting money in their pockets. We also strongly advise that people who get contacted by companies to buy their homes but require a service fee be avoided. Many of these companies are scams or are middlemen.
Should I hold on to my Philadelphia home or sell it now?
It depends on your financial circumstances. If you can afford to get it renovated and updated, you can potentially sell it for more. If you can’t, there is no reason to hold on to it. Sell it immediately because the longer you hold it, the worse its condition can become.
Is Philadelphia Real Estate Markert on the cusp of a housing bubble?
We think that many parts of the city are in a housing bubble. This bubble can pop at any time because the prices are highly inflated. The expected oncoming recession could pop the bubble. However, it will make it immensely more challenging for people to sell or rent their homes in low-tier neighborhoods.