The City of Brotherly Love has had its ups and downs with its housing market. Following COVID-19, Philadelphia, among other cities, experienced an inventory squeeze that catapulted prices and left home sellers euphoric. As the market calmed, Philly went back to its usual ways of intense summer selling seasons and cold winters. The remainder of 2023 into 2024 looks like it could be one of the coldest winters yet for the Philadelphia housing market.
The Philadelphia Housing Market is Declining
The housing market in Philadelphia is known for its powerful summer selling seasons. It’s the classic flow of real estate that many large cities experience. Everyone buys and sells between May–August. Outside of those months, it’s crickets.
This pattern has played out perfectly over the past 3 years in the Philadelphia real estate market, even through the turbulent months of COVID-19. Redfin’s charts show the massive peaks of the summer months, including the summer of 2023. If you sold your home in Philadelphia during those months, you likely did okay. On the other side of these charts, you can see the grueling troughs that make up the winter lows.
Since the pattern has played out consistently over the years, the same is expected for 2023 into 2024. However, the macroeconomic landscape is different this time. Mortgage rates continue to soar, which will make buyers even fewer and farther between during the upcoming winter months. The winter of 2023 for the Philadelphia real estate market is expected to be extremely cold and tough for buyers and sellers.
Philadelphia Housing Baggage
Even on a good day, Philadelphia comes with baggage. As someone who owns several rental properties in the City of Brotherly Love, and a real estate agent who has completed over +100 transactions between flips and listings, I can personally attest to this.
Abundance of Vacant Lots
Although there is no housing shortage here, there is an ungodly amount of vacant lots littered throughout the city. Many are located in low-valued neighborhoods, making them nearly worthless. Because of this, owners hold on to them for decades without paying property taxes or water bills. Eventually, they get sold at the sheriff’s sale, and the cycle continues.
For Philadelphia landlords, filling vacancies is becoming tougher as the economy worsens and consumer spending tightens. If you’re lucky enough to have tenants, be grateful for it. Many landlords are forced to go through the arduous eviction process in Philly. Trying to evict a non-paying tenant in Philadelphia can take 6-12 months. Landlords are getting stuck holding the bag and are at the mercy of their occupants.
Philadelphia also has an abundance of vacant, abandoned homes in shell-like condition. Sadly, squatters are a major issue in this city. Landlords can try to eject them or try cash for keys. Either way, it’s not a cheap or enjoyable experience.
Philadelphia Real Estate Market Data
Philadelphia wishes it had a housing shortage. Unfortunately, there are plenty of homes on the market, even following a busy summer season. Currently, Philly has around 6,300, active listings of homes for sale, according to Zillow. The housing supply in Philadelphia, as of April 2023, was at a 3.4-month supply compared to the national average of other big cities, which sat at 2.1-month supply.
Typically, homes don’t fly off the shelves in Philadelphia, unless they are located in hot neighborhoods. If you’re planning on selling a home in Philly in one of these Philadelphia neighborhoods, expect a shorter time on market period:
- Port Richmond
- Northern Liberties
- Cobbs Creek
Philadelphia Home Values
For first-time homebuyers, Philadelphia is an attractive city because of its home prices. The median home value in the City of Brotherly Love sits at around $270,000. This is $130,000 less than the current national average. Prices have decreased roughly 4% since last year. A large contributor to this is likely the high interest mortgage rates here, which have priced out many homebuyers.
Time on the Market
Fortunately for Philadelphia homebuyers, there’s no rush to buy a home. They don’t fly off the shelves (typically) in this city. Even in the highest peaks of the summer months, the DOM (days on market) averages around 35 – 45 days. Again, Philadelphia follows the classic wild summer selling months and slow winter months in terms of real estate values and sales. For real estate investors or buyers looking for good deals, shop during the coldest months of the year.
The depths of real estate winters in Philadelphia bring tough times for sellers. Last winter (2022 into 2023), Philadelphia suffered from a staggeringly long DOM of 70 Days in the month of February. This was the longest DOM in 5 years. Yikes! Since interest rates are even higher now, it’s expected to get worse this winter for Philadelphia home sellers.
Philadelphians are praying that once the frost breaks in the spring of 2024, it will regulate the median sale price of the housing market, and things won’t be as bad. If you need to sell during the winter months coming up, expect the high possibility of taking a haircut on price.
Timing the Housing Market
Selling a home in Philadelphia is all about trying to time the market. The summer months are fantastic for selling a home, but tougher for buying one. The inverse is true for the winter – a great time to buy with far less competition. But trying to sell a property in Philadlephia between November – March will be a struggle.
DOM has increased this past winter in Philadelphia, mostly caused by high-interest rates. It’s the same story for many other cities across the country. Many new homebuyers are priced out of the market. First-time homeowners looking to upsize can’t sell their current home because they cannot afford a new one. The market is frozen because most people aren’t buying or selling right now unless they need to or can really afford to financially.
Typical Philadelphia Sellers and Buyers
The Philadelphia housing market is getting dominated by Baby Boomers because it’s frozen. Millennials, and most other generations for that matter, are stuck. Most cannot buy or sell a house right now. Some Baby Boomers were fortunate enough to get into the housing market when home prices were still affordable, and rates were low. Now that this isn’t the case, the ball is in their court.
In Philly, it’s common for residents to purchase their first home in their 20s. The median sale price in the Philadelphia metro area is less than the national average, making it affordable compared to many big cities.
Philadelphia also draws in many young professionals because of the job opportunities and vibrant culture. Many buyers in their 20s purchase their first home or townhome here and then move to the Philly suburbs later in life when starting a family.
As mentioned before, most homeowners aren’t selling right now unless they need to. This includes a ton of landlords who own an investment property and are now dealing with non-paying tenants, squatters, or properties that are simply losing them money.
Another common type of family that is still selling now is one dealing with inheritance situations. Oftentimes, a family member who passes away and lives in a metropolitan area of Philadelphia will pass their property down to a family member who doesn’t want to keep it or doesn’t even live in Pennsylvania.
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Why People Move to Philadelphia
In 2023, the most movement in/out of Philadelphia is people moving into Philadelphia from NYC. It’s less like the fact that Philadelphia is much better in ways than NYC. Some simply view it as ‘not as bad and cheaper’ than the Big Apple.
Although Philadelphia has a ton of baggage, so does NYC. This surge in people renting and moving from NYC into Philadelphia was partially spurred by COVID-19 and people leaving large cities. Philadelphia is a good alternative to places like NYC, Washington D.C., and San Francisco because it’s much more affordable while still offering a ‘big city’ lifestyle.
Philadelphia Housing Market Forecast
Assuming that Philadelphia follows the same high summer and low winter pattern that has played out perfectly over the past 3 years, residents should expect the housing market to slow in the coming months and into the beginning of 2024. Days on market will increase, home prices will drop, and it will be tougher to find homebuyers when trying to sell.
Real estate investors have wondered if buying an investment property in Philadelphia is a good investment. With the predicted decline in the list price for average homes, it might be time to snag a good deal on a property. In addition, Philadelphia is the largest city in the Delaware Valley, and will likely maintain a consistent demand for rental homes.
Yet, the median rent has declined over the past year. With the changing dynamics of the economy, as well as the neighborhood shifts in Philly, real estate investors are wise to examine mortgage rates, labor statistics, and properties that will have a relatively safe return on investment.
The Future of Philadelphia Real Estate
Although the short-term doesn’t look very bright for the Philadelphia housing market, it always finds a way to persevere and make it to the next summer. The ice will eventually thaw, and home prices will again go up. Either way, it’s important to work with an expert real estate agent in Philadelphia to help you buy or sell a home. They will help you navigate the turbulent waters of the City of Brotherly Love.