5 Takeaways from a Q3 Philly Housing Report: Is the Market Cooling?
The Philadelphia housing market is showing signs of deceleration and a cooling market according to a Q3 report. Let’s take a look at 5 key statistics to give us a pulse on the market. Kevin C. Gillen, Ph.D. is an economist who holds positions as both a Senior Research Fellow with the Lindy Institute for Urban Innovation and an adjunct Professor of Finance at Drexel University. He produces quarterly reports on the state of the Philadelphia region’s housing market. His most recent data release shows data through Q3 of this year (July through September 2022). Below is what he found. Keep in mind: although some of these numbers are showing decreases, this is not a reason to panic or instill fear. Be sure to read the conclusion at the end.
1. Home Sales Activity Dropped Significantly, but Remains Above Average
There were 5,600 real estate transactions in Philadelphia during Q3.
That is a 35% decrease form Q1 2022 when there were 8,655 sales, which was the record high since 1980.
2. Philly Home Prices are Decreasing, but Still Higher than a Year Ago
The average price of Philadelphia homes fell by 1.8% in Q3. That’s the largest quarterly decline in 8 years.
However, home prices still remain higher than a year ago. They have just decelerated in price growth. Philly’s general level of annual house price appreciation has fallen into the single digits for the first time since the pandemic. From 2020 to 2022 Q2, house price growth averaged 12.1%.
The city’s general level of house prices are up 5.9% from last year at this time. At the end of Q2, house prices were up 12.7% from a year ago.
The median house price in Philly fell 4.2% in Q3. Right now, the median sales price is $230,000. In Q2 it was $240,000. One year ago it was $235,000.
This number is different than the above average house price index because the index controls for seasonal fluctuations while the median price does not.
3. Million Dollar Home Sales Dropped in Q3
$1 million+ home sales have been breaking records for the past year, but this has slowed.
There were 79 home sales at a price of $1 million or more in Q3. That is down 17% from 95 of those sales in Q2.
4. Home Inventory is Increasing
There are currently about 5,000 homes listed for sale in Philly. The average for the city is about 6,000, however this is still significantly higher than what we’ve seen over the past few years.
Inventory is up 72% from the city’s record low of 2,910 in February of 2021.
5. Conclusion: Be Wary, but Don’t Panic
The Philadelphia housing market has had a great run over the past several years. Home prices are up 85.4% over the past 10 years.
According to Gillen, there are some positives to a cooling housing market. He says:
Affordability is a problem and we need to see that improve. If home prices level off a bit, household incomes can have time to catch up and even things out.
It could give some relief to the recent high levels of inflation.
As home inventory rises, homebuyers have more options and opportunities for their homeownership goals to become a reality. It also gives a more even playing field instead of the extreme seller’s market we’ve seen over the past few years.