Data show the Philly area housing market is slowing down

The Philadelphia region’s housing market ended 2022 on a slow note.

December is typically a slow month. But activity in the Philadelphia metropolitan area dropped to the lowest level in eight years, mirroring months-long slowdowns in the rest of the Mid-Atlantic and nationwide, according to the multiple listing service Bright MLS.

Demand slowed as fewer buyers were able to afford homes, thanks in part to the overall rise in mortgage interest rates throughout 2022. The average 30-year fixed mortgage rate has been trending down since reaching a peak of more than 7% in November.

This year, buyers and sellers will start to accept a “new normal” in which interest rates are around 6%, and pent-up demand from hesitant buyers — and those distracted by the holidays — will be released, said Lisa Sturtevant, chief economist at Bright MLS.

Market information for this story was all provided by Bright MLS.

Sellers joined buyers in slowing their activity last month compared with the last couple of years.

Although the region had nearly a quarter more active home listings in December than it did a year earlier, “it’s almost entirely because people have stopped buying homes and not because people are rushing out to list their homes,” Sturtevant said.

Supply rose fastest for single-family detached homes and townhouses, according to Bright MLS. But the supply of homes for sale remained less than half of what it was three years earlier.

Roughly 3,900 new listings entered the market in the Philly metro area in December. That’s the lowest number of monthly new listings in more than two decades, according to Bright MLS.

If the rate of sales remained steady and no new homes were listed for sale, the supply of homes on the market in December would have lasted about six weeks. A balanced market is five to seven months of supply.

“If you happen to still be in the market trying to buy a home, it still feels competitive,” Sturtevant said.

Housing supply could start to rise a bit in the spring — the season when activity tends to pick up — but “I just don’t see that happening in the Philadelphia metro area in the coming months,” she said.

Thanks to low supply, home prices have stayed high. The median home price in the region peaked in June but is more than 30% higher than before the pandemic.

The median sales price in the Philly metro was $320,000 in December, according to Bright MLS. That’s about 5% higher than the previous December.

The Philadelphia region’s relative affordability attracted buyers who could handle rising prices. The region’s market also generally has less volatile prices than markets in other parts of the country, some of which are seeing price drops as sales slow from the frenzy of the early stages of the pandemic.

The Mid-Atlantic region as a whole had its lowest level of home sales in a decade, with roughly 3,900 new pending sales in December. That’s almost 2,000 fewer new contracts than a year earlier.

More than 4,900 home sales closed last month, down almost 38% from the previous year.

A lot of people who may have planned to buy in 2023 accelerated their decision and bought in 2021 or 2022 when mortgage rates were lower, Sturtevant said.

The country has a large population of residents who are at prime first-time home-buying age, and markets will likely see sales in 2023 from pent-up demand from potential buyers who have been waiting to see what mortgage rates and the economy do.