Philadelphia real estate prices largely have returned to prerecession levels and the market is hot, lenders and real estate agents say.
“[The market] is absolutely on fire,” said Heather Patrone-Shook, president of the Greater Philadelphia Association of Realtors. “We have a wealth of millennials. With all the colleges and universities in the area, students stay here and are employed in the workforce.”
Patrone-Shook said the City of Brotherly Love has undergone a transformation in recent years amid new construction and redevelopment. Even the landscaping has changed, improving the city’s walkability factor—an amenity important to millennials, who make up the largest population segment nationwide and are on track to make up three-quarters of the workforce by 2025.
While it’s no Silicon Valley, the latest data shows the entire region is on the rise. In October, the National Association of Realtors ranked the Philadelphia-Camden-Wilmington area as the 85th hottest real estate market, up from 102 in October 2016, out of 300 U.S. metropolitan areas ranked. The hottest market was in San Jose-Sunnyvale-Santa Clara, Calif., while Naples-Immokalee-Marco Island, Fla., ranked last.
According to the National Association of Realtors, inventory is moving 11 percent faster than last year in the Philadelphia area, and 1 day slower than the U.S. overall. The median number of days a home spends on the market is 72.
Of course, some neighborhoods are hotter than others, with the most competition for homes in Grays Ferry, Point Breeze, Brewerytown and East Falls, according to Patrone-Shook. Most of the other action is along the Interstate 95 and I-76 corridors, she said. Additionally, the universities are expanding their campuses, and old warehouse space is being put to new uses.
“There’s a lot of reconfiguring. What was once old is now new,” said Patrone-Shook, noting that most homes are priced in the $250,000 to $300,000 range.
In September, the latest month for which statistics are available, the median price for homes sold in the Philadelphia metro area was $215,000, up $1,000 from last year, Bright MLS, an association of 43 multiple listing services, reported. More homes also were sold in 2017 than 2016: 7,597 compared with 7,438.
The National Association of Realtors puts the median price of homes in the city at $274,000, up 10 percent from last year, compared to $275,000 nationally, as of Oct. 1.
Tom Forker, sales manager at Bryn Mawr Trust, said low inventory is pushing prices up and encouraging first-time buyers to act more quickly, with anything in the $200,000 to $750,000 price range going fast.
“Both the city and suburbs have an inventory problem,” he said, noting that price points in both areas are similar.
A lot of the movement, he said, is empty nesters leaving their suburban homes for condominiums in the city. And while millennials are looking to get into their first homes, student debt is an obstacle.
“It’s their perceived ability to qualify. They’re waiting longer to pull the trigger,” he said.
Forker said he doesn’t think looming federal interest rate hikes will have much of an impact—even a 0.75 percentage point rise.
“Everybody can still qualify,” he said. “But the price point likely will go down.”
Thirty-year mortgages are still available for less than 4 percent, with buyers favoring the 15- or 30-year loans over more volatile adjustable rates.
“Eventually, I think people will get more comfortable with once-common vehicles [like adjustable-rate mortgages, or ARMs,] that will come back again. Right now we’re finding the only people who take on ARMs are the more experienced homebuyers.”
Patrone-Shook, of the Greater Philadelphia Association of Realtors, said one thing the market is not seeing is speculation, which helped tank the economy in 2007.
“A lot are owner-occupants,” she said. “We do have an influx of parents buying property for students [attending college here] as an investment.”
Robert McLaughlin, senior vice president and director of mortgages at Bryn Mawr Trust, said condominiums really are driving the marketplace, with smaller, high-end units the most active segment. Not just just empty nesters are buying up units. Corporations are, too.
The effect is redevelopment of old neighborhoods, he said, a phenomenon that can also send taxes up and push out longtime residents who can’t afford the increased costs.
“It’s an issue the city is trying to deal with effectively, but it’s not an easy one,” Forker said.