Philadelphia continues to attract wealthy home buyers, and in the first quarter of this year, sales of million-dollar homes hit a record.
At least 87 homes priced at $1 million or above sold in the first three months of the year, according to Drexel economist Kevin Gillen’s analysis of multiple listing service data. In the same period last year, Philadelphia buyers purchased 32 of these homes. In the years before the pandemic, home sales at that price point averaged 97 for the entire year.
Prices across all segments of the housing market have been rising over the last two years, thanks to strong buyer demand and insufficient housing supply. That’s pushing some homes past $1 million. The pandemic also spurred residents to look for larger — and more expensive — homes.
Philadelphia also has attracted buyers from more expensive cities who are seeking the region’s relative affordability as they retire or work remotely. Philadelphia’s culture, art scene, entertainment, restaurants, and location, as well as jobs in medical and other professions, draw wealthy buyers. It’s a good sign for the city, said Realtor Kristen Foote, who specializes in sales of multimillion-dollar homes as team leader of Kristen Foote & Co. at Compass in Center City.
“People have the confidence, and they want to invest here,” she said. “The values in Philadelphia are still incredible.”
And the city’s 10-year tax abatement, which residents of newly constructed multimillion-dollar homes are taking advantage of, “is still a big driving force” and an incentive other cities don’t have, she said.
While million-dollar home sales reached a record this year, homes that cost more than $1 million remain a sliver of Philadelphia’s real estate market.
About 41% of homes in the city that sold in 2021 cost between $250,000 and $500,000, according to an analysis of sales data by the Center City District, which manages and cares for the downtown area. About 38% of homes that sold last year cost between $100,000 and $250,000. Roughly 2% cost more than $1 million.
Analyses by the Center City District and Gillen don’t include luxury homes and some high-end condos that aren’t listed on the traditional multiple listing services. A series of multimillion-dollar condos and townhouses in the greater Center City area — including the 2100 Hamilton condos near the Art Museum, the Laurel Rittenhouse Square condos, and the Arthaus condos on the Avenue of the Arts segment of South Broad Street — are nearing completion.
Philadelphia also is seeing an increase in the “ultra-luxury market” of homes selling above $3 million, Foote said.
“In the past five years, especially now with all this new construction, we’re seeing so many more residential units” selling in the $5 million to $8 million range, she said.
When Foote started out 15 years ago, a home selling for $1.5 million in the city was a big deal, she said. For a long time, the $1 million to $2 million range was Philadelphia’s high-end market, she said. Now, those homes sell quickly, and many of Foote’s clients are buying and selling at $4 million or higher.
And while rising mortgage interest rates can deter buyers in the $1 million range or lower, they don’t concern buyers paying a few million dollars in cash for homes. Some homeowners in the ultra-luxury market were living at vacation homes earlier in the pandemic, but now they’re back and want to keep a place in Philadelphia, Foote said.
As people throughout the country with newly remote jobs continue to reevaluate where they want to live, “Philadelphia does have this very competitive advantage,” said Paul Levy, president of the Center City District. “We have a lot of what people want,” from cultural institutions to short commute times to homes that may cost hundreds of thousands of dollars less than in another East Coast city.
In New York and Washington, for example, million-dollar homes make up roughly 20% of the housing stock, according to the Center City District’s analysis of census data.
Although growth in the real estate market is healthy for Philadelphia, Levy said, the city also needs faster and more inclusive job and wage growth to make sure residents can afford to stay, more businesses coming in, and development of vacant properties in order to leverage the city’s position.
“There’s a really huge opportunity for Philadelphia at this moment,” he said.