Updated October 2023
We've combined statistics from the past few months and our experience working with clients to give you a market update for the city and the suburbs.
HOME VALUES
PHILADELPHIA
The home value index* at the end of September was $215,846, a 2.5% decrease compared to this time last year.
While this is city-wide, the yearly changes by zip code range anywhere from -14.1% (in 19133) to +2.6% (in 19154). As always in Philly, submarkets are important when it comes to numbers.
SUBURBS
In all the surrounding NJ counties, the change since last year increased: Bucks +5.5%, Chester +5.4% , Delaware +5.5%, Montgomery +5.3%, bringing the home value indexes to Bucks $464,754, Chester $514,286, Delaware $329,362, Montgomery $443,222.*
In all the surrounding NJ counties, the change since last year increased: Burlington +7.9%, Camden +9.0% , Gloucester +7.8%, Salem +8.2%, bringing the home value indexes to Burlington $362,783, Camden $305,758, Gloucester $334,040, Salem $261,134*
All suburban counties continue to show positive yearly changes in value, although at a slower pace than the past couple years. These single digit percentages are closer to pre-pandemic appreciation than the double digits we saw in 2021 and 2022. For reference, all the surrounding counties were showing yearly increases above 10% last fall.
SUPPLY AND DEMAND
When the home supply exceeds the buyer demand, it’s considered a buyer’s market. When this happens, seller’s have high competition and the leverage of the market leans toward buyers. You see more buyer concessions, like seller’s assists and home sale contingencies. On the flip side, a supply of homes that cannot meet the buyer demand is considered a seller’s market. Under these market conditions, buyer’s are in competition and the leverage leans toward the seller’s. This is what we have seen amplified in the past couple years, where it’s common to see low days on market, multiple bids, and waived inspections. Looking at the measurements for supply and demand helps predict how the market will react so you can be prepared to enter the market as a buyer or seller.
Both Philadelphia and surrounding counties have had historically low supply of inventory in the past few years. Even before the pandemic, inventory was hitting all-time lows in Philadelphia. In fact, there were more new listings in both 2021 and 2022 than there were in 2019. This combined with high buyer demand created a high absorption rate over the past couple years. Most of the new listed homes were purchased quickly, leaving all-time low inventory to be on the market. While some areas and price ranges show signs of relief for tight inventory, others seem to be back in a tight market.
City-wide in Philadelphia, there was a 13% decrease in the number of new listings in Q3 this year compared to Q3 last year. In the suburban counties, the median was a 14% decrease. While their inventories both decreased similarly, the demand did not.
A number that helps quantify demand vs supply is the month's supply of inventory (MSI.) The MSI represents how many months it would take to sell all the homes on the market based on its current sales pace (the demand). An MSI of under 5 usually reflects a seller’s market, 5-7 a balanced market, and > 7 a buyer’s market.
Philadelphia: The MSI was 3.9 in Q3 2023, where it has been since April of this year.*
Suburbs: The MSI was 1.5 in Q3 2023. January was 1.6, which it has hovered around for over a year. This means it would take less than two months to sell all the inventory in the suburbs based on the current demand.*
While both MSI numbers are representative of a seller’s market (under 5), the city’s number is moving closer to a balanced market. This may be part of the reason why we are seeing seller’s assists and home sale contingencies in the city, even with tight inventory.
AFFORDABILITY
It’s true that higher rates and inflation affect buyer affordability and demand. We have already seen the slow-down of accelerating home values in the city, and home values are expected to have nearly zero change over the next 12 months (see forecasts below) in both the city and suburbs.
As a buyer, know that a 1% increase for a 30-yr mortgage is about $75 per month for every 100K you borrow. We know some buyers have been in the market for a while now. If you are one of those buyers, it might be a good time to talk to your lender about getting a new pre-approval to see what you can afford. Rates vary based on your debt to income, your down payment, and credit. SO while you may read about 7.8% rates, the range may start much lower at 6.75%. Many lenders are also offering to waive their fees for future refinancing.
Rates are not everything when it comes to affordability. There are ways to offset extra costs, like buying down points, seller’s assists, or using loan programs that offer grants. There are also Adjustable Rate Mortgages (ARMs) that have lower rates than conventional mortgages in the beginning of your loan. There is also an option to refinance when rates get lower.
Talking one-on-one with an agent about affordability is an excellent way to remove tunnel vision when considering rates. They will be able to give you a target purchase price based on your monthly budget, or vice versa. They can also pair you with a lender that is the best fit for you.
FORECAST FOR HOME VALUE
Over the next 12 months, home values are expected to slightly change. By county: +0.5% in Philadelphia, +1.3% in Delaware, +1.3% in Montgomery, +1.2% in Bucks, +1.4% in Chester. * (Zillow Home Value Forecast.) The uniformity of these predictions is a sign that the market will not be jumping up or down. This is good for both buyers or sellers that have been trying to catch the “best time” to buy or list.
WHAT TO EXPECT FOR BUYERS AND SELLERS
While buyers are dealing with higher mortgage rates, competition has cooled for some in the city. Yes, inventory is still considered to be low in Philly, but it feels like a bit of relief since last year when you consider the demand has cooled a bit. This may all change, however, when the mortgage rates fall and the demand shoots back up. Without the inventory to meet the demand, the competition will be high. For qualifying buyers, it may be more advantageous to purchase a home now with less competition. There is a better chance you’ll be able to buy with a home sale contingency, negotiate repairs, or get a seller’s assist. Remember, submarkets are the name of the game in the Philly metro. Your competition and affordability may vary depending on where and what you are looking for in a home. Certain areas and price ranges are still showing high competition. In other areas, homes have been staying on the market longer. These are areas where you’ll have more leverage as a buyer.
While there is some relief in Philly for buyers, the suburbs have not yet felt the same relief as the supply of inventory remains much lower than the demand. At the peak of competitiveness in the suburbs, we saw multiple bids coming in the day the home was listed, offering greatly over the listing price and waiving all contingencies. Many buyers were not able to compete. And while multiple offers on listings still exist, they do not look the same. We’ve seen buyers win bidding wars with a seller’s assist or with an offer at or below the listing price. If you are thinking about moving from the city to the suburbs, now is a good time to map out your timeline and get your financial ducks in a row so you’re ready when new inventory hits.
For sellers, inventory is still low in the city and tight in the suburbs. In both areas, new inventory will be welcomed with open arms! In the city, buyers are not reacting to the tightness of the market the same way they did last year because demand has gone down slightly. Listing your home with market pricing and perfect presentation gives you the best advanatge to sell in this market. When you sit with us for a listing appointment, we pull data specific to your zip code or neighborhood, which may be different from the city-wide or suburb-wide data. This hyper-local report can better predict your home’s competition. We can help you put together a pricing strategy based on statistics and your motivation.
Philly Home Girls agents want to empower you with all the knowledge you need to make a decision about your real estate goals. We are ready to be your in-market leader, expert negotiator, fiduciary advocate and overall guide through this process. If you are curious about the home buying or selling process or want to learn more about the current market, we’d love to set up a chat to answer all your questions.
*Data from Zillow.com | ** Data from BrightMLS | ^ Lindy Institute for Urban Innovation at Drexel University
Saving money for a downpayment and closing costs is the # 1 reason people are holding off on purchasing a home. PHG agent Rachel Shaw came up with a trusty list of some of her favorite homebuyer assistance grants and loan programs. With a little help, your dream of owning a home may not be as far off as you thought!