Philadelphia's housing market has been a focal point of interest, with questions arising about home prices, the wisdom of buying a house, and the overall attractiveness of the real estate market. To address these inquiries, we delve into the recent developments and future projections for the Philadelphia metro area, exploring key factors that impact the housing market.

Philadelphia's Rise in the Top 10 Housing Markets of 2024

The Philadelphia metro area, including Camden and Wilmington, is gaining attention as one of the top 10 markets according to multiple sources, exhibiting significant growth potential in home sales for 2024. Ranked 8th among the 100 largest metropolitan areas, Philadelphia is expected to see a resurgence in real estate activity after a period of subdued market conditions. Additionally, the Harrisburg metro secured the 5th spot on this list, reinforcing a positive outlook for increased real estate activity in the broader region.

Factors Driving Optimism

Several factors contribute to the optimistic forecast for the Philadelphia region:

1. Drop in Mortgage Interest Rates: Foremost among these is the anticipation of a continued drop in mortgage interest rates throughout the next year. This trend is predicted to attract more buyers who were previously priced out of the market and encourage existing homeowners to consider selling.
2. Affordability for First-Time Homebuyers: The region stands out with twice as many properties deemed affordable for first-time homebuyers compared to other metropolitan areas, especially in October.
3. Prolonged Homeowner Tenure: The prolonged tenure of homeowners in the Philadelphia region, with 44% having lived in their properties for longer than the local average of 17 years, suggests a potential surge in listings if market conditions become more favorable.
4. Strategic Location and Amenities: The region's affordability, strategic location between New York and Washington, and the presence of walkable communities, jobs, and recreational opportunities all contribute to its inclusion in the top 10 list.
5. Positive Outlook for Crime and Public Safety: Despite challenges such as lower wage growth and crime rates, real estate experts remain optimistic about the region's desirability. The incoming police commissioner and the positive outlook accompanying the new city administration contribute to overall confidence in Philadelphia's real estate market.

Anticipated Market Dynamics

Looking ahead, the market is expected to witness increased activity, with entry-level buyers predicted to enter the market. More homes are expected to become available for sale as homeowners decide to sell, coupled with the prospect of lower mortgage rates. The persistent issue of low inventory is expected to see some alleviation as more homeowners decide to sell.

The mortgage rate trend is particularly noteworthy, with rates for the popular 30-year fixed mortgage expected to decrease further. The average mortgage rate of around 6.6% in the second half of 2024, potentially opening up the market to nearly 4.5 million households.

Beyond Philadelphia, the Harrisburg metro area also emerges as an attractive market, securing its place in the top 10 list. Affordability compared to other parts of the country, coupled with a significant percentage of renters who can afford the median-priced home, positions it favorably. High-earning millennials relocating from other states further contribute to the region's potential as a robust real estate market.

Philadelphia Housing Market Trends and Forecast for 2024

Current Market Dynamics

The current data indicates that the Philadelphia housing market is leaning towards a buyer's market due to limited and slow levels of buyer interest across various housing segments. Challenges such as declining demand and higher mortgage rates are observed, but the term "crash" does not align explicitly with the current market trends. Continuous monitoring is crucial to assess potential market shifts.

The Bright MLS T3 Home Demand Index for the Philadelphia Metro area reveals a 3.1% decline in November, reaching a level of 63, indicative of limited buyer demand. This marks the third consecutive month in the Limited category, with a significant 17.1% decrease compared to the same period last year.

While entry-level single-family homes and condos experienced a marginal increase in demand, other housing types, particularly luxury single-family homes, witnessed lower interest in November. The supply conditions varied across housing types, with months of supply ranging from 1.8 to 6.5 months. Higher mortgage rates and unfavorable inventory conditions continue to impact market activity at year-end.

Regional analysis shows mixed patterns in buyer demand across the Philadelphia Metro area, with limited interest in certain regions and slow demand in others. Segment-specific performance indicates fluctuations in buyer interest for entry-level and luxury condos, single-family homes, and entry-level condos.

Considering the limited and slow levels of buyer interest, coupled with challenges like higher mortgage rates, it may be a favorable time for potential buyers to explore opportunities in the Philadelphia housing market. However, individual circumstances and market fluctuations should be taken into account.

Zillow's Insights for 2024

Looking ahead to the Philadelphia housing market forecast for 2024, Zillow provides valuable insights. The average home value in the Philadelphia-Camden-Wilmington area stands at $341,744, reflecting a 6.4% increase over the past year. The market forecast indicates a positive trajectory with a projected growth of 3.1% for the next year. Inventory, pricing dynamics, and sales performance metrics further contribute to the comprehensive overview.

Real Estate Investment Overview

Philadelphia's real estate investment overview highlights the city's affordability, strong real estate appreciation, and the potential for a favorable return on investment. Factors such as density, affordability, and a growing population contribute to the city's appeal for real estate investors. The strong short-term rental market and landlord-friendly conditions add to the attractiveness of the Philadelphia housing market for investors.

Real Estate Market Update: Philly and Suburbs

Philadelphia Home Values and Trends

Home value index at the end of September: $215,846, a 2.5% decrease from last year. Yearly changes by zip code range from -14.1% to +2.6%.

Suburban NJ Counties

Suburban NJ counties show positive yearly changes ranging from +5.3% to +9.0%. Despite historically low inventory in Philadelphia, more new listings in 2021 and 2022 than in 2019.

New Listings and Inventory Trends

Q3 2023 saw a 13% decrease in new listings in Philadelphia; suburbs had a 14% decrease. Months Supply of Inventory (MSI): Philadelphia's MSI was 3.9 (seller's market), suburbs' MSI was 1.5 (strong seller's market).

Affected by Higher Rates and Inflation

The market is affected by higher rates and inflation, with an expected nearly zero change in home values over the next 12 months. The forecast for home value changes by county ranges from +0.5% to +1.4%.

Buyer and Seller Dynamics

Buyers in the city may experience some relief due to cooled competition, but the suburbs still face tight inventory. Buyers should consider taking advantage of the current market conditions, and sellers are advised to list with market pricing and perfect presentation for the best advantage in the current market.

Conclusion

In conclusion, the Philadelphia housing market in 2024 is a nuanced landscape with varying dynamics across different segments and regions. While macroeconomic factors and favorable projections indicate a positive trajectory, it's essential for both buyers and sellers to navigate the market cautiously, considering individual circumstances and preferences. The convergence of affordability, strategic location, and amenities makes Philadelphia an enticing real estate market, and with careful consideration, stakeholders can unlock the full potential of this dynamic and evolving city.