Realtor Brian Stetler recently sold two homes in Delaware County that he had helped his clients purchase a year and a half ago. The homeowners had made no improvements to the properties, but each sold for between $150,000 and $250,000 more than they paid.
Homes on busy streets, along train tracks, and next to the roar of I-76 and I-95 — properties that would have trouble selling in years past — are selling quickly, he said. Stetler, an agent with Berkshire Hathaway HomeServices Fox & Roach Realtors based in Society Hill, lists homes for sale midweek, and by the following Monday, he’s reviewing offers with his sellers. August has been unusually busy.
“We’re in unprecedented territory,” he said.
But even before the pandemic helped push the housing market into overdrive, sales and prices had been on an upswing in the Philadelphia region and across the country since the return of the market following the Great Recession. Pending home sales in the Philadelphia metropolitan area in the month of August shot up from about 8,400 in 2012 to more than 15,500 in 2021, according to the multiple listing service Bright MLS. The region’s median sale price jumped more than $100,000.
“The last decade has really been this very strong housing market,” said Lisa Sturtevant, Bright MLS economist adviser and chief economist at the Virginia Association of Realtors.
During that time, more of the large millennial generation moved into their prime home-buying years, driving up demand. Low mortgage rates over the last decade also have made homes more affordable and enticed buyers. The 30-year fixed mortgage rate averaged 3.66% in 2012, according to the government-sponsored mortgage financier Freddie Mac. That rate — historically low at the time — has dropped further over the last decade. The average rate in 2021 so far is 2.92%.
Over the last 10 years, metropolitan areas across the country, including Philadelphia, have seen “pretty dramatic price growth,” Sturtevant said. From August 2012 to August 2021, the median sale price in the Philadelphia region jumped about 48% — from $220,000 to $325,000, according to Bright MLS. That’s good news for homeowners who have held on to their properties. It’s a challenge for aspiring home buyers whose wages haven’t kept pace and who don’t have funds from prior home sales.
Home seekers from New York City and Washington who can work from home have looked to the Philadelphia region for homes that are relatively more affordable. The Philadelphia metropolitan area includes the city, its collar counties in Pennsylvania and New Jersey, and Kent and New Castle Counties in Delaware.
Although the rate of price growth has been slowing in recent weeks, homes were more likely to sell above their listing price this August than in any August in the previous nine years, according to Bright MLS. The Philadelphia area’s median home price was up more than 25% last month compared with August 2019. Some people may look at the price increases and fear another housing bubble, but red flags such as risky home loans aren’t driving housing market growth.
“The strength of the Philadelphia housing market is being driven by really sound fundamentals,” Sturtevant said. “It’s a strong market that’s very different than our last very strong market.”
Stetler said it’s hard to predict what the near future will bring. But, he said, “we do know the prices aren’t going down anytime soon. Because there’s no availability.”
Builders constructed too many homes in many places ahead of the Great Recession and overcorrected and built too few homes in the years after, said Sheharyar Bokhari, senior economist at Redfin. The pace of home construction over the last decade has not kept up with growing demand. Homeowners are staying in their homes longer, and more older residents are aging in place, which means fewer homes on the market. Earlier in the pandemic, supply-chain disruptions and the skyrocketing prices of building materials hindered builders, who are still facing worker shortages.
The supply of homes on the market remains at a historical low. In August 2012, the Philadelphia region had more than nine months’ worth of housing supply — the time it would take for homes on the market to sell. Last month, the region’s supply stood at less than six weeks.
Inadequate housing supply restricts market activity, but over the next few months, Bokhari said, “the market is still going to be strong.”
During the pandemic, some home seekers were able to save money, and they used those savings to purchase houses. Over the rest of this year and next year, the economy should continue to improve and bring more people financial stability, which should keep the market strong, Sturtevant said.
A cooling of what has been a frenzied market will follow, she said, and, in a year or two, the market may become more balanced.