As The Weather Begins To Cool, The Philadelphia Real Estate Market Is Heating Up!p

As the weather begins to cool, the Philadelphia Real Estate market appears to be heating up, even in the face of rising mortgage rates. In August 2023, the median sales price in the Philadelphia metro area reached an all-time high of $370,000, marking a substantial 5.7% increase compared to the previous year. The market has been on a relentless upward trajectory, outpacing many other regions in the country. What's driving this growth? Strong demand and relative affordability are key factors propelling Philadelphia's real estate market.

One of the standout characteristics of this market is its incredibly low inventory. By the end of August, there were just 9,460 active listings across the metro area, a staggering 14.9% drop compared to the previous year. The scarcity is most pronounced in the suburbs, where there is less than a 1.5-month supply of homes available. The heightened competition is evident in the median days on market, which dropped to just nine days, one day faster than the previous year. This is the first year-over-year decline in median days on the market since March 2022, signaling a fiercely competitive landscape with multiple offers and prices frequently exceeding listing values.

Key Market Stats:

1. Closed Sales: There were 6,150 closed sales in August 2023, representing a 19.9% decrease from the previous year. Detached homes saw the most significant decline, with 21% fewer sales year-over-year.

2. Median Sale Price: The median sales price in August stood at $370,000, marking a 5.7% year-over-year increase. Condos saw the most substantial price hike, rising by 9.6%, with a 2.0% increase month-to-month.

3. Median Days on Market: The median days on the market remained steady at nine days, one day less than the previous year. This is the first year-over-year decrease in days on the market since March 2022.

4. New Pending Sales: August saw 5,861 new pending sales, a 19.8% drop compared to the previous year, with a slight 0.7% decrease from the previous month.

5. Inventory: The Philadelphia metro area experienced its fourth consecutive month of year-over-year decreases in inventory, down 14.9% in August 2023 compared to August 2022.

Despite slight fluctuations in some local markets, August witnessed median sales prices rising in most areas within the Philadelphia metro region. Several suburban counties even saw prices surge by over 10% year-over-year, hitting new record highs. While there were slight dips in Philadelphia County and New Castle County, Delaware, due to these outliers, low supply remains the primary driver of rising home prices throughout the region. Notably, Bucks County, PA, and Montgomery County, PA, have less than a month of supply, underscoring the high demand and low inventory dynamic.

The speed of home sales in the region continues to be impressive. With the exception of Philadelphia County, the median days on the market decreased by one day in August compared to the previous year, reflecting the enduring trend of rapid sales.

Amidst this hot market, the 30-year fixed mortgage rate surpassed 7% in mid-August, a significant jump from the mid-6% range that had persisted for months. This increase can have a substantial impact on affordability, with the difference between a 6% and 7% rate translating to hundreds of dollars per month for buyers. For instance, using the median sale price of $370,000 in Philadelphia, this rate shift results in a $219 difference in monthly payments. This higher rate not only affects affordability but also adds to the psychological burden of buyers. The current mortgage rates have exceeded the previous high set in November 2022 and are now the highest in two decades. Interestingly, both buyers and sellers appear to be cautious in this environment, which is likely to maintain firm prices in the market.

In conclusion, the Philadelphia housing market remains red-hot, with record-high prices, fierce competition, and dwindling inventory. Even as mortgage rates rise, the market shows resilience, making it a challenging but exciting landscape for both buyers and sellers.