Philadelphia, otherwise known as the City of Brotherly Love, has found itself in a rather favorable situation. In fact, those familiar with its local markets have commented on the “Goldilocks” nature of this sprawling metropolitan area: It’s neither too hot nor too cold, but just right. Current conditions are actually very conducive to a healthy level of growth and activity. According to Zillow, home prices are expected to increase by as much as 0.5% in the next year.
Boding well for Philadelphia are predictions of “good if not great” job growth in several sectors, including one of this region’s linchpins, healthcare and biological research. While Philadelphia’s unemployment rate is behind that of the national average, it has improved dramatically over the course of a year. At 8.2%, the unemployment rate for the Philadelphia area is 0.7% higher than the national average, but it continues to hold up and is heading in the right direction. Job growth, for the moment, is relatively stagnant, but should increase with the recent expansion of the economy. For all intents and purposes, improving conditions should continue play a major role in the supply and demand of the local housing market.
Affordability continues to favor those in the Philadelphia housing market. While affordability is historically strong, it is currently weaker than it was at the onset of 2014. That is due, largely in part, to the rapid rates of appreciation. But Philadelphia remains more affordable than most markets across the United States. Half way through the year, homeowners in Philadelphia were allocating an average of 9.7% of their income to mortgage payments, whereas the rest of the country was spending about 14.9%.
A generational shift in locational preferences also looks to favor the direction in which the Philadelphia market is heading: Millennials are the largest demographic group since the Baby Boomer generation, and its members are displaying a shift in residential preference from suburban to urban communities. The transition has proven instrumental in the rebuilding of Philadelphia’s housing market, as the active participation of first-time buyers should stimulate the local economy.
As we get closer to the end of the year, the median home price in Philadelphia is approximately $227,200. Conversely, the average price on a national level is about $15,000 less. As with almost every other city, the rate in which prices continue to appreciate is up from a year ago, but the rate is starting to ease. It was this price growth that served to remove Philadelphia from the post-market recession price weakness. It would appear, however, that homes in Philadelphia are not keeping up with the rate of appreciation across the country.
Homeowners that were fortunate enough to purchase property in 2005, nine years ago, have gained an average of $44,858 in equity. By comparison, that is nearly $40,000 more than the national average. However, more recently, equity gains have favored the rest of the country. Across the U.S., homes purchased within the last year have gained about $12,731 in equity. Comparatively, Philadelphia owners have only gained $3,841 in the same period. In fact, price trends over the last three years have undercut the steady post-recession home equity growth despite owners paying down their principle.
New construction is on the rise, as single-family housing permits increased 1.9% from a year ago. The increase suggests that local inventory has stabilized. While new construction is the traditional driver of supply in real estate, foreclosures and short sales now have a strong impact on inventories, particularly at the local level. Rising inventories, through construction or distressed sales, place downward pressure on the median home prices.
According to The Long & Foster Market Minute for Philadelphia, recent data indicates that there were 1,846 homes newly listed for sale in Philadelphia County compared to 1,790 in August 2013, an increase of 3%. There were 912 current contracts pending sale this August compared to 970 a year ago. The number of current contracts is 6% lower than last August.
The percent of delinquent mortgages in Philadelphia is 9.3%, which is higher than the national value of 6.9%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages. The percent of Philadelphia homeowners underwater on their mortgage is 26.2%, which is higher than Philadelphia Metro at 20.1%.
According to Trulia, popular neighborhoods in Philadelphia include Fairmount/Art Museum and Northern Liberties/ Fishtown, with average listing prices of $358,721 and $522,568.
-See more at: http://www.fortunebuilders.com/philadelphia-real-estate-market-trends/