Our industry specialist has reviewed and approved the final article. Also, some of the data presented here have been integrated into the Philadelphia real estate spreadsheet template.
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Expecting a decrease in Philadelphia's prices in 2025? Think again.
Even with changing dynamics, Philly's market is robust, with high demand and tight supply pushing prices upward.
Let's explore why this city's costs are set to rise in 2025.
This article gives you valuable insights, but remember, it’s not and will never be investment advice. We pull data from a range of sources to provide you with the most accurate picture possible, yet we can’t guarantee complete accuracy. Markets are difficult to predict. Make sure to do your own research and consult a professional before making any financial moves. Any risks or losses are your own responsibility.
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1) Philadelphia has about 0.45 homes per person, indicating a limited housing supply
Signal strength: strong
The fact that there is around 0.45 home per inhabitant in Philadelphia suggests a limited housing supply.
When housing supply is limited, the demand for available homes tends to increase, which can drive up prices. In Philadelphia, a unique factor is the strong presence of universities and colleges, attracting students and staff who need housing.
This influx of people creates additional demand for housing, further tightening the market. As a result, with more people competing for fewer homes, prices are likely to rise.
If the ratio were to increase to around 0.6 home per inhabitant, it might indicate a more balanced market, potentially stabilizing prices.
Source: USCensus
2) Philadelphia home values have already risen by 3.5% since last year, and this trend may persist
Signal strength: strong
The fact that home values in Philadelphia have already changed by 3.5% since last year is a strong indicator that the housing market is on an upward trend. This increase suggests that demand is growing, which often leads to higher prices.
Currently, the median home price in Philadelphia is around $222,483, and this figure is crucial for potential investors to consider. Additionally, the median sales price per square foot is around $194, which provides insight into the cost efficiency of properties in the area.
These numbers reflect a market that is gaining momentum, and if this trend continues, housing prices are likely to rise in 2025. For investors, this could mean a promising opportunity to enter the market before prices climb even higher.
However, if the home value change were to drop below 1%, it might signal a stagnation or decline, challenging the assumption of rising prices.
Source: Redfin
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3) Three major websites predict that home prices in Philadelphia will rise in 2025
Signal strength: strong
There are three major websites forecasting a positive growth for home prices in Philadelphia in 2025, which is a promising signal for potential investors.
Among these forecasts, Realtor is the most optimistic with a prediction of a 6.10% increase, followed by Redfin's forecast of a 4% rise, and finally, Zillow anticipates a 2.60% growth. The significant gap between these predictions suggests varying levels of confidence in the market's potential.
While these forecasts are encouraging, it's important to remember that predictions should be taken with caution as they are based on current trends and assumptions. We will also rely on strong, reliable, and actual data to make a well-informed professional judgment about the market's future.
If these forecasts were to predict a negative growth or a decline in home prices, it would signal a potential downturn in the market.
Sources: ZillowForecasts, RedfinForecasts, RealtorForecasts
4) Philadelphia's "Livability" score of 76 indicates a good quality of life
Signal strength: moderate
The livability score of 76 in Philadelphia is considered good because it reflects a balance of amenities, cost of living, and quality of life that appeals to residents and potential newcomers.
One reason for this score is the city's rich historical and cultural attractions, which draw both tourists and new residents, enhancing the local economy and desirability. Additionally, Philadelphia boasts diverse and vibrant neighborhoods, offering a range of living experiences from urban to suburban, which can attract a wide demographic of homebuyers. Furthermore, the city has a strong educational and healthcare infrastructure, with renowned universities and hospitals that provide stability and job opportunities, making it an attractive place to live.
These factors contribute to the assumption that housing prices are likely to rise in 2025 as more people seek to move to areas with high livability scores. A good livability score often indicates a demand for housing, which can drive up prices as supply struggles to keep pace.
However, if the livability score were to drop below 65, indicating a decline in quality of life, it could signal potential challenges in the housing market, possibly leading to stagnation or a decrease in housing prices.
Source: AreaVibes
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5) Philadelphia's median home price is significantly lower, at 49% below the national average
Signal strength: minimal
The fact that Philadelphia still has a median home price 49% below the national average suggests that there is significant room for growth in the housing market. This gap indicates that the city is potentially undervalued compared to other major cities, making it an attractive option for investors looking for appreciation opportunities.
In Philadelphia, the most expensive properties are likely to be luxury townhouses in areas like Rittenhouse Square, where demand is high due to the neighborhood's prestige and amenities. On the other hand, the cheapest properties are often small rowhouses in neighborhoods like Kensington, which are still undergoing revitalization and may offer potential for future growth.
As the city continues to develop and attract new residents, it's reasonable to expect that housing prices will increase in 2025, especially as more people seek affordable alternatives to pricier markets. This trend is supported by the current price disparity, which suggests that Philadelphia's market has not yet reached its full potential.
However, if the median home price in Philadelphia were to rise above the national average, it might indicate that the market has become overvalued, potentially signaling a slowdown in price growth.
Source: Zillow
6) A local in Philadelphia typically needs about 3.7 years to afford a house, which is reasonable
Signal strength: minimal
In Philadelphia, it would take around 3.7 years for a local to buy a house, which is considered a reasonable timeframe. This suggests that the housing market is relatively accessible, but it also indicates that housing demand is likely to increase as more people find it feasible to purchase homes.
With a median household income of approximately $60,302, residents have a decent earning capacity to support home buying. The current median home price is about $222,483, which aligns well with the income levels, making homeownership attainable for many.
As demand grows, it is reasonable to expect that housing prices will rise in 2025 due to increased competition among buyers. This trend is further supported by the fact that affordability remains within reach for many locals, encouraging more people to enter the market.
If the time required to buy a house were to increase significantly, say to over 5 years for a local, it might suggest that housing prices are stabilizing or even decreasing.
Source: USCensus
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7) In Philadelphia, about 26% of homes sell for more than their listing price
Signal strength: minimal
In Philadelphia, around 26% of sales close at a price higher than the listing price, which is a significant indicator of demand. When buyers are willing to pay more than the asking price, it often means that competition among buyers is strong and they are eager to secure a property.
This kind of competitive environment typically leads to an upward pressure on housing prices, as sellers recognize the opportunity to increase their asking prices. As more buyers are willing to pay above the listing price, it suggests that the market is experiencing a trend where prices are likely to rise.
For potential real estate investors, this is a signal that investing in Philadelphia's housing market could be a profitable decision in the near future. However, if the percentage of sales closing above the listing price were to drop significantly, say below 10% of sales closing above the listing price, it might indicate a cooling market.
Source: Zillow
8) In Philadelphia, home prices have risen by an average of 6.7% annually over the past decade
Signal strength: minimal
The fact that home prices in Philadelphia have appreciated at an average rate of 6.7% over the last decade is a noteworthy signal for potential investors. This consistent growth rate suggests that there has been a steady demand and upward trend in home values, which can be a positive indicator for future price increases.
While this historical data shows a pattern of price growth and market strength, it's important to remember that past performance doesn't guarantee future results. However, such a track record can still be a valuable piece of information when considering investment opportunities.
Investors should view this as one of several factors that might influence their decision to invest in real estate in Philadelphia. If the average appreciation rate were to drop significantly, say below 2% over a similar period, it might suggest a different market outlook.
Source: NeighborhoodScout
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So, are prices going to climb in Philadelphia in 2025? Yes, they are!
Philadelphia's housing market is poised for a price increase in 2025, driven by several compelling factors.
Firstly, the city has a limited housing supply with only 0.45 homes per person, which naturally leads to increased demand and higher prices. The presence of universities and colleges further intensifies this demand, as students and staff seek housing. Additionally, home values have already risen by 3.5% since last year, indicating a strong upward trend that is likely to continue.
Moreover, forecasts from major websites predict a rise in home prices, with Realtor expecting a 6.10% increase. Philadelphia's livability score of 76 and its median home price being 49% below the national average make it an attractive market for potential buyers and investors. The fact that 26% of homes sell for more than their listing price further underscores the competitive nature of the market.
Finally, the historical data showing an average annual price increase of 6.7% over the past decade supports the expectation of continued growth. All these factors combined suggest that Philadelphia's housing prices are set to climb in 2025, making it a promising market for investment.