If you are looking at buying a house in Philadelphia as a potential investment in 2020, you must read until the end. Philadelphia is one of the oldest and largest cities in the United States. In the past month, houses in the Philadelphia real estate market sold for higher prices than they have in a decade, and that is mainly due to historically low mortgage rates and tight inventory. As new listings are decreasing due to the impact of coronavirus pandemic, the housing inventory has been squeezed further leading to a surge in asking prices of the Philadelphia properties.
Let’s talk a bit about Philadelphia before we discuss what lies ahead for investors and homebuyers. Philadelphia is too often written off as a has-been, a historical city that has joined the Rust-Belt. However, this city is on the rebound and the Philadelphia real estate market predictions show us an excellent opportunity for investors in 2020 and coming years. Philadelphia is the largest city in Pennsylvania and the second largest on the East Coast. It is the sixth biggest city in the United States (Phoenix has beat out Philly for that spot in the top five).
And unlike many other big cities, its population is slowly growing. Its population has grown every year for at least seven years, and it is the second-fastest-growing county in the region. How big is the Philadelphia Housing Market? Well, more than one and a half a million people live in Philadelphia proper. Philadelphia is in the hub of the Delaware Valley. That is the sixth-largest metropolitan area in the United States. That metro area is home to around six million people.
If you only look at Philadelphia and its immediate suburbs, then the Philadelphia housing market still includes four million people. Is Philadelphia going to be one of the hottest real estate markets for investors in 2020? Like most cities nationwide, Philadelphia has experienced real estate appreciation over the last couple of years. The real estate appreciation rate in Philadelphia in the last quarter was around 0.83%, which amounts to an annual rate of 3.35%.
However, it is quite unclear whether the rate of appreciation would remain steady or not due to the short term effects of the ongoing pandemic. Economic uncertainty might hold back sales volume for a short period in 2020. Most housing analysts expect Philadelphia house prices to remain flat or drop by a small fraction for the remainder of the year 2020.
In this article, we shall discuss some more important reasons why you may still want to consider buying Philadelphia investment properties in 2020. You will get a fair amount of knowledge of the fundamentals of this hot real estate market. Please note that many variables can potentially impact the value of a home in Philadelphia (or any other market) and some of these variables are impossible to predict in advance.
Let’s take a deep look at the latest Philadelphia housing market trends to conclude.
Philadelphia Housing Market Trends & Statistics 2020
We shall now discuss some of the most recent housing trends in the Philadelphia area and compare it with the past couple of years. We shall mainly discuss median home prices, inventory, economy, growth, and neighborhoods, which will help you understand the way the local real estate market moves in this region. Philadelphia has been one of the hottest real estate markets in the country for many years.
Philadelphia is currently a hot seller’s real estate market – which means that the demand from buyers is exceeding the current supply of homes for sale. The pricing of homes is trending higher and is more attractive for sellers in the current phase. The shortage of supply and an increase in the demand for housing will push the prices higher in the Philadelphia housing market.
The following analysis of the Philadelphia Metro Area housing market has been prepared by Bright MLS for April 2020.
- Houses for sale in the Philadelphia region sold more quickly in April 2020.
- The median number of days on the market was 16 last month, a 10-year low.
- House sold for higher prices than they have in a decade.
- The Philadelphia metropolitan area’s median sale price was $272,100, the highest for any April in the last 10 years.
- The median sale price was $32,000 higher than April of last year.
- Low supply is leading to an increase in Philadelphia home prices.
- Homes in Bucks and Chester Counties sold the quickest, spending a median of nine days on the market.
On Movoto.com, Philadelphia’s current home resale inventory number is 3,447, which has decreased by 18 percent from a year ago. Compared to last month (April) the inventory has increased by 4%. The median list price per square foot in Philadelphia is $196. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in May.
The ongoing pandemic has not had any impact on Philadelphia home prices yet. Historically low-interest rates, tight inventory, and strong demand are continuing to favor sellers in the Philadelphia housing market. However, Pennsylvania is the only state in which most in-person real estate activity is still shut down for the majority of residents.
Real estate activity has been considered as a nonessential business and in-person showings of homes in all the counties are prohibited. Due to such measures taken by the government, the new listings have decreased. Sellers are not willing to put new homes for sale on the market until restrictions are revoked. Last month, the Philadelphia housing market had 4,505 new listings, the lowest April figure in a decade.
Philadelphia Real Estate Market Forecast 2020 – 2021
What are the Philadelphia real estate market predictions? Philadelphia housing market 2020 is shaping up to continue the trend of the last few years as one of the hottest markets in the nation. Let us look at the price trends recorded by Zillow (a real estate database company) over the past few years. The Philadelphia house prices remained flat for a short period between 2013 to 2014. Since 2015, the median home price in Philadelphia has appreciated by roughly 41.2%, from 133,000 to $187,772.
Last year saw was the fifth consecutive year of home price gains. The median home value in Philadelphia (on Zillow) is $187,772, up by 5.4% from a year ago. According to Zillow’s statistics, currently, Philadelphia is a sizzling hot seller’s market. However, the latest Philadelphia real estate market forecastdepicts a little cooling-off trend for the period of the next twelve months. The home prices are predicted to remain flat or may decrease by just 1.1% in the next twelve months. This is perhaps due to the short term impact of the coronavirus pandemic on real estate sales in the Philadelphia area.
Philadelphia Real Estate – Philadelphia, PA Homes For Sale
Philadelphia housing market has a mixture of owner-occupied and renter-occupied units. As per Neigborhoodscout.com, a real estate data provider, three and four-bedroom row houses and attached homes are the most common housing units in Philadelphia. Other types of housing that are prevalent in Philadelphia include large apartment complexes, single-family detached homes, duplexes, and homes converted to apartments.
Philadelphia's single-family homes account for only 8% of the city’s housing units. At the national level, the single-family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single-family rental units. With 2020 being, theoretically, in the middle of a boom, there are still 4 years for residential construction to surge. Most likely, a housing shortage will remain in 2020, keeping home prices high.
Currently, there are 2676 homes for sale in Philadelphia, PA on Zillow. Additionally, there are 1345 homes for rent. Under potential listings, there are about 110 Foreclosed and 3422 Pre-Foreclosure homes. These are the delinquent properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).
- The median list price per square foot in Philadelphia is $180, which is higher than the Philadelphia-Camden-Wilmington Metro average of $151.
- The median price of homes for sale is $234,900.
- The median price of homes that were sold in March is $188,300.
- The median rent price in Philadelphia is $1,490, which is lower than the Philadelphia-Camden-Wilmington Metro median of $1,550.
There are currently 5550 homes for sale and 5003 homes for rent in Philadelphia, PA on Realtor.com, a real estate listings website. The newly listed homes are 530. According to their statistics, in April 2020, the Philadelphia housing market was a buyer’s market, which means there were roughly fewer buyers than there were active homes for sale. Supply outpaced the demand for favoring buyers in the region.
Ideally, a buyer would prefer a sale to asking price ratio that’s closer to 90%. The sellers in Philadelphia have managed to hold good leverage in these negotiations in the past month. Despite being a buyer's real estate market, on average, they could sell homes for 98.41% of the asking price. A seller would always prefer scenarios that can yield a ratio of 100% or higher.
In April 2020, the median list price of homes in Philadelphia, PA was $240K, trending up 6.7% year-over-year. The median listing price per square foot was $178. The median sale price was $284.7K.
Philadelphia Real Estate Foreclosure Statistics
Here are some foreclosure statistics of the Philadelphia real estate market. As per the Philadelphia foreclosure data by Zillow, the percent of delinquent mortgages in Philadelphia is 3.0%, which is higher than the national value of 1.1%. The percent of Philadelphia homeowners underwater on their mortgage is 13.3%, which is higher than Philadelphia-Camden-Wilmington Metro at 10.0%.
There are currently 4,135 properties in Philadelphia, PA in some stage of foreclosure (default, auction, or bank-owned) while the number of homes listed for sale on RealtyTrac is 2,842. In April 2020, the number of properties that received a foreclosure filing in Philadelphia, PA was 94% lower than the previous month and 95% lower than the same time last year.
In Philadelphia, the zip code with the highest foreclosure rate is 19151, where 1 in every 4498 housing units is foreclosed. 19146 zip code has the lowest foreclosure rate, where 1 in every 9855 housing units become delinquent.
Philadelphia Real Estate Market: Is It A Good Place For Investment?
Now that you know where Philadelphia is, you probably want to know why we’re recommending it to real estate investors. Investing in real estate is touted as a great way to become wealthy. Should you consider Philadelphia real estate investment? Many real estate investors have asked themselves if buying an investment property in Philadelphia is a good investment?
You need to drill deeper into local trends if you want to know what the market holds for the real estate investors and buyers in 2020. Although this article alone is not a comprehensive source to make a final investment decision for Philadelphia, we have collected ten evidence-based positive things for investors who are keen to buy an investment property in Philadelphia.
Let’s look at the state of the Philadelphia real estate market and the factors driving the market in the short and long term.
1. Density Provides Opportunity
One downside of a thoroughly built-up market is that you cannot expand out – everything else is already built out. This means you can only really build up, redevelop, or subdivide. The relative lack of supply compared to demand also keeps rents and property values strong, too. More than half of the jobs are in Center City and University Center, meaning that nearly everyone wants to live in and around these areas. If you can find properties to convert into multi-family housing or luxury housing, you’ll earn a significant return on the investment.
2. Philadelphia Real Estate is Historically Affordable
The median selling price for Philadelphia real estate is $200,000. These prices vary wildly depending on the perceived safety and desirability of the neighborhood. The fact remains that you can find $40-$60,000 single family homes for sale that you can rent out to single mothers with children who would value a little privacy. You can find condos and older homes that could be renovated and flipped with a modest profit margin. In several zip codes within the Philadelphia housing market, more than 10% of real estate transactions are “flipped sales”.
3. The Near Certain Capital Gains in Philadelphia Real Estate
We’ve addressed the ROI you’d likely see as a landlord. The other half of that equation is the increasing value of the property you’d recoup if and when you sell it. According to Zillow, Philadelphia properties saw a roughly 5.4% price increase in the last twelve months, and they expect prices to go up in 2020 as well. Philadelphia appreciation rates continue to be some of the highest in the nation, at 4% (last 12 months), which is slightly above the national average. Based on the last twelve months, real estate investors have found good fortune in Philadelphia.
4. The High Return on Investment
The traditional rental income from properties in the Philadelphia housing market is $1300 a month, though this value includes everything from two-bedroom single-family homes to five bedrooms three bath luxury properties. If you use the median property value of $200,000, the traditional cash-on-cash return for these properties is 2.6%. Find a deal or upgrade a home to cater to an upscale market, and you’d see better rates of return.
There is another reason to expect better ROI, and that is the fact that rents in Philadelphia are rising. The median rent for properties in the Philadelphia housing market is estimated to be $1400 a month, though that’s lower than you’d see in the surrounding suburbs. There is only room to go up.
5. The Large Philadelphia Rental Market
Around 48% of housing units in the Philadelphia housing market are rented out, somewhat higher than the national average. This is driven in part by the relatively poor urban population and in part by the higher than an average number of singles living alone. Center City has a large, carless population that will prioritize living by public transit and, because they don’t have a vehicle, cannot move out to the suburbs. Do your legal research before you buy rental properties in the Philadelphia real estate market because you’ll be subject to taxes and fees that aren’t mandated by Pennsylvania state law.
6. The Strong Short-Term Rental Market
While other major cities have waged war on Airbnb and other short term rental sites, Philadelphia realizes this is a good way to cater to tourists and help local homeowners earn income. This is why Philadelphia stands out as friendly to short-term rental sites like Airbnb. One of the few conditions to meet is the payment of the 8.5% tax on all profits and you don’t make the property not look like a home. Note that these rules apply to primary residences. As a non-resident landlord, you can rent out homes via Airbnb, too, but you have to apply for a visitor accommodations variance. Multi-family housing can also be rented out via Airbnb in Philadelphia if you fill out the right paperwork.
7. Philadelphia Has Diverse Student Market
Nearly every large city is home to universities, themselves home to a large population of renters – students. Philadelphia as both an old and large city contains several universities. There are twenty-four-year universities alone in Philadelphia, several of which are in Center City. There are another dozen two year and tech schools in Philadelphia. And adding to the diverse Philadelphia student rental market are the medical schools and seminaries in the city.
8. Philadelphia Foreclosures Make It A Large Distressed Seller's Market
We’ve mentioned the possibility of getting a deal in the Philadelphia real estate market, but the data shows that’s fairly likely. For example, about 3% of homeowners are delinquent on their mortgage payments. In comparison, about 1% of the general population is behind on house payments. This provides many opportunities to find deals in the Philadelphia real estate market.
9. Philadelphia is a Known Hot Market
One of the best investment opportunities in the Philadelphia housing market is those areas you already know everyone wants to live. For example, the Graduate Hospital neighborhood is hot. The 19118 and 19106 zip codes are seeing the greatest property valuations and price increases.
Interestingly, there are zip codes next to these that have seen flat and declining values; if you buy properties in the 19132 or 19125 zip codes that have flat or falling values and attract those wanting to live in 19121 or 19133, you could see significant returns. This means you don’t have to do deep research or guess to know how to profit from the Philadelphia real estate market.
10. It Is Relatively Landlord-Friendly
Many real estate investors want to know if an area is landlord friendly or tenant-friendly. Pennsylvania itself is generally landlord-friendly. Philadelphia, though, is somewhat stricter. In early 2018, the City Council discussed laws that would limit evictions to those cases with just cause. Just cause does include failure to pay rent, nuisance behavior, and breach of the lease. You simply cannot evict someone to renovate the property.
The tenant would have to be given a chance to accept a new lease or higher rent when renewing the lease, rather than being evicted. Other laws are much more land-lord friendly. There is no payment grace period law. There aren’t limits on late fees. There are no pet laws. While the state of Pennsylvania doesn’t require a license to rent out a house, anyone buying properties in the Philadelphia housing market does have to get a commercial activity license and housing rental license.
Philadelphia Real Estate: Investment Properties
Are you looking for an investment property in the Philadelphia real estate market? Maybe you have done a bit of real estate investing in Philadelphia but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. The Philadelphia real estate market offers an ideal mix of affordable properties you can snap up and a large population of renters who aren’t going to buy homes any time soon.
You won’t face the same hostility as a landlord as you might in New Jersey or New York, whether renting to long-term tenants or tourists. Good cash flow from Philadelphia investment properties means the investment is, needless to say, profitable. A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding the best investment property in Philadelphia in a growing neighborhood would be key to your success. If you invest wisely in Philadelphia's real estate, you could secure your future.
If you are a beginner in the business of cash flow real estate investing, it very important to read good books on real estate. The less expensive the Philadelphia investment property is, the lower your ongoing expenses will be. As with any real estate purchase, act wisely. Evaluate the specifics of the Philadelphia housing market at the time you intend to purchase. When looking for the best real estate investments in Philadelphia, you should focus on neighborhoods with relatively high population density and employment growth. Both of them translate into high demand for housing.
Some of the best neighborhoods in or around Philadelphia, Pennsylvania are Bustleton, Point Breeze, Northern Liberties, Brewerytown, Fishtown, Port Richmond, Center City, West Oak Lane, Germantown, Washington Square West, Logan Square, East Falls, Society Hill, Stanton, Rittenhouse, Elkins Park, and Francisville.
The asking price of single-family homes for sale in Philadelphia (on Realtor.com) starts from $19,900 for a 1-bedroom house and can go up to $4.4M for a luxury 5-bedroom house located in Chestnut Hill neighborhood. Chestnut Hill is an expensive neighborhood to live in Philadelphia, with a median home price of $999,000. North Central, Philadelphia is quite an affordable neighborhood to invest in real estate. The median sales price in North Central, Philadelphia, PA is $101,500. The price per sqft is $86.
In contrast, the West Poplar, Philadelphia is a little expensive neighborhood with a median sales price of $397,000 and a price per sqft of $257. Graduate Hospital has a median listing price of $585K, making it the most expensive neighborhood to live in Philadelphia. Olney is the most affordable neighborhood, with a median listing price of $127.5K. There are currently 229 new construction houses available for sale in the Philadelphia housing market (on Realtor.com). You can get a 2-bedroom new construction single-family house for around $175,000 located in the West Philadelphia neighborhood.
Home prices in Philadelphia are near the national average for all cities and towns in the United States. Here is a snapshot that shows the median home values in some of the popular neighborhoods of Philadelphia.
If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable. You can also collaborate and learn from savvy real estate investors who have retired early on in their lives by investing in some of the hottest real estate markets like Philadelphia, PA. You should also join real estate investment clubs in Philadelphia and try to make connections with fellow investors.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Philadelphia.
Consult with one of the investment counselors who can help build you a custom portfolio of Philadelphia turnkey investment properties in some of the best neighborhoods. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Philadelphia turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
Philadelphia & Neighboring Real Estate Investment Opportunities
Another hot real estate market in the state of Pennsylvania where you can invest for the long term is Harrisburg. Harrisburg has a more favorable legal and tax climate, and it is stable. That makes it a good choice for real estate investors as long as you are investing in rental income instead of massive capital gains. And you could still earn a lot of money with fix-and-flip in the Harrisburg housing market.
On the south of Pennsylvania lies the state of Maryland. In Maryland, Baltimore is a favorable destination for real estate investors from all over the country. If you are looking for an affordable real estate market with high potential for return on investment, you should consider Baltimore. Baltimore's real estate appreciation rate in the latest quarter was around 1.9%. Looking at the positive forecast, the annual appreciation rate is predicted to be between 7% to 8%.
On the east of Pennsylvania lies the expensive New York City real estate market. Even though New York City is one of the most expensive real estate markets in the world, there are relatively affordable neighborhoods where people compete for apartments and homes. NYC real estate is most likely to be a profitable investment when rented out over a long holding period. If you are looking to make a profit, you can buy and hold an investment property in NYC that you might move into or sell at retirement in the future. NYC real estate investment has a track record of being one of the best long term investments in the nation. NYC's real estate prices have appreciated by roughly 42% over the last decade.