The next few months will likely be tough for Philadelphia-area homebuyers as they start the year with even fewer options than they had at the same time last year.
Last month’s housing supply in the Philadelphia metro area was down 9% from December 2020 and about 35% from pre-pandemic levels in December 2019, according to Zillow.
“Conditions are actually, surprisingly, worse for buyers than they were a year ago,” said Zillow senior economist Jeff Tucker.
Housing demand is outstripping supply at a faster rate than a year ago. Record low supply has pushed up home prices, frustrated buyers and discouraged some homeowners from selling and competing for homes themselves.
The median home value in the Philadelphia metro area is $313,529, up nearly 15% in December 2021 from December 2020, according to Zillow. Meanwhile, mortgage interest rates – although still at historic lows – are rising and pushing up monthly housing costs. The market is particularly difficult for first-time home buyers.
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“For someone who doesn’t have a foothold in indexing real estate values, it’s a tough time to try,” Tucker said.
But “Philadelphia’s inventory shortage is not as acute as that of the nation as a whole,” Tucker said. National supply last month was down nearly 41% from December 2019 levels.
“There were some glimmers of hope on the inventory front” in the summer and into October when supply was catching up, he said.
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Then the progress stopped and reversed. In the Philadelphia area, inventory fell 11% from November 2021 to December. It’s hard to pinpoint exactly why, Tucker said, but a few factors come into play.
The spike in coronavirus cases could make landlords hesitant to list homes. Many workers are in limbo because they are not yet sure of their employer’s long-term plans for in-person work.
Builders are beginning construction of new homes at their fastest annual rate since 2006, according to the Census Bureau. But home completions have lagged as builders continue to deal with shipping delays, material and labor shortages and inspection backlogs.
In the Philadelphia metropolitan area, less new listings hit the market in December compared to the same period in 2020. New listings were down in all counties in the region except Delaware County, which saw an increase of nearly 3 %, according to the Mid-Atlantic Bright MLS Multiple Listings Service. New registrations are down more than 15% in Burlington, Gloucester and Chester counties.
As was the case last winter, buyer demand defied usual expectations and remains strong. “Buyers were more determined to stick with buying a home, perhaps because the summer was so daunting,” Tucker said.
READ MORE: Supply of homes for sale around Philly expected to remain low for some time
In the Philadelphia area as well as the country as a whole, homes typically stay on the market for 13 days before buyers buy them.
The strong seller’s market is expected to extend into the busier spring season.
Doug Duncan, chief economist at Fannie Mae, said “the combination of more new homes being built and higher mortgage rates weighing on buying demand will start to bring a better balance between supply and demand.” In the coming months.
Each spring, the housing market sees more homes come on the market than in the winter, so more listings will come, although there won’t be as many homes for sale as buyers might have previously expected.
“The silver lining for buyers is that they will have more options,” Tucker said. “Everyone benefits from having more options to choose from to help them find the right person for their family, so they can be happy in the home they end up in.”