Philadelphia is technically a buyer’s market, but housing economists say that’s misleading

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Philadelphia’s housing market remains deeply unaffordable for would-be buyers, even as more homes come up for sale.

While there are more listings than last year, economists say inventory remains historically low. And the homes that are on the market are more expensive than ever.

In fact, home prices in Philadelphia are growing at one of the strongest rates in the country, largely because of the city’s health care sector.

“Philadelphia’s large and strong health care industry is creating many jobs and driving income growth. The increase in jobs and income is, in turn, driving up housing demand and thus supporting stronger house price growth,” said Mark Zandi, chief economist at Moody’s Analytics.

“And there’s no … metropolitan economy in the country that has more health care and is more dependent on the health care industry than Philadelphia,” he said.

Factor in high mortgage rates, and the city’s housing market is simply unaffordable for most people looking to buy, particularly first-time homebuyers, Zandi said.

Sellers are also having a tough time.

Low inventory is one problem. But there are also a lot of homeowners who are hampered by the low mortgage rates they secured during the COVID-19 pandemic, often through refinancing. For these buyers, moving to a new place could mean a significantly more expensive mortgage payment each month because rates are so much higher now.

That’s further straining the market because it has created a host of stubborn sellers, said Redfin chief economist Daryl Fairweather.

“Sellers that are in the market aren’t as serious as they have been in the past. We’re seeing a near-record share of homes being delisted from the market, sellers listing their homes at prices that are too high and then they linger on the market longer without getting any offers,” Fairweather said.

And she said there’s a clear explanation for why this is happening.

“If they were to sell and try to buy again, they would want to have a lot of equity in the sale so that they can buy their next home with cash or with a really large down payment, so they don’t have to take on so much interest and suffer under these high interest rates,” Fairweather said.

Buyers, meanwhile, can’t afford to pay what sellers are asking.

All of it demonstrates why a new analysis from Redfin is a bit misleading.

According to the report, the Philadelphia metropolitan statistical area is a buyer’s market because it had more sellers than buyers in May. There were 6,324 buyers and 8,858 sellers in the area, which covers Philadelphia and Delaware County.

Zandi said that while the numbers may be accurate, the market remains daunting for both sides of the equation, even if buyers technically have more choice.

“The reason why there aren’t a whole lot of buyers is because people can’t afford to buy. So I wouldn’t take a whole lot of solace in that,” he said.

Economists say it will likely take years for the country’s housing market to improve, including in Philadelphia.