Mid-Atlantic: Continued Growth, Setting it Apart from Other National Regions
Throughout July, the Mid-Atlantic region saw a 3.9% increase in home prices, boosting the median price to $400,000. This made for the strongest price growth since the beginning of this year, going against the trends seen in other national markets.
The summer market has remained strong, a continuation of the patterns previously observed in June. The elevated mortgage rates have not discouraged competition among buyers vying for a property among the historically low levels of inventory. This is according to the Mid-Atlantic July Housing Report released by Bright MLS.
Dr. Lisa Sturtevant, Chief Economist at Bright MLS, has expressed her surprise at the market’s resilience in the face of higher rates and prices. She noted that even first-time buyers are finding ways to navigate the competitive landscape, with tactics like assumable mortgages and seller financing becoming part of the conversation.
Notably, prices saw an uptick across several metropolitan markets including Washington, D.C., Philadelphia, and Baltimore. Median days on the market, indicating the speed of property turnover, remained consistent at seven days in Baltimore, nine days in Philadelphia, and decreased by a day in the Washington, D.C. metro area, making it seven days.
While the summer season typically brings a slight market cooldown due to vacations and travel, there has been no such relief for buyers this summer. The report highlights a significant drop of over 29% in new properties listed across the region. Active listings have also decreased by 19.1%, indicating that the market pace remains rapid. This emphasizes the need for buyers to act swiftly when encountering the right property.
The report further shows that new pending sales have decreased by 13%, and closed sales experienced a 20% decline in the region for July. The limited inventory has also proven to decrease property showings, which saw a nearly 12% reduction compared to the previous year. Despite these declines, the gap in market activity between the current year and the previous year has narrowed.
Looking ahead, Bright MLS anticipates that the fall market in the Mid-Atlantic region will be characterized by ongoing low inventory, stable or potentially rising home prices, and increasing challenges related to affordability. While mortgage rates are projected to decrease slightly, they are expected to hover around 6.5%. Homeowners are less inclined to sell, fearing the loss of their favorable rates. However, listing activity is predicted to show a slight uptick in the coming months. This could be driven by “movers of necessity” and transactions involving non-standard financing options, such as assumable mortgages and seller financing.
Philadelphia Metro Area: Strong Price Growth Despite Affordability Challenges
The residential real estate market in Philadelphia has experienced a steady and promising recent performance. A steady surge in demand for housing coupled with continued low inventory, has caused property prices to continue their upward trend.
In July, the Philadelphia metro area witnessed a median home price of $369,000, just shy of June’s record at $370,000. Price surges extended to all local markets, including Philadelphia County, which had experienced a dip earlier in the year.
Despite affordability challenges, homebuyers remain actively engaged in the Philadelphia market. Although there was a 13.8% drop in showing activity compared to the previous July, the gap in buyer traffic between 2022 and 2023 is gradually narrowing.
While all of this information can be somewhat daunting, it is important to keep in mind that real estate is often a long-term investment and historically has proven to be one of the largest wealth builders amongst Americans!
State of the Commercial Real Estate Market
Philadelphia’s commercial real estate sector has shown remarkable resilience over the past decade, even navigating the pandemic and fluctuating interest rates. Let’s delve into the four key asset classes, highlighting essential terms:
Net Absorption: This measures the change in leased space over a period, showing whether more space was leased or vacated. Positive net absorption indicates lower vacancy, while negative net absorption points to increased vacant space. It’s a gauge of market demand and health.
Cap Rate (Capitalization Rate): This vital metric assesses potential ROI for a commercial property. It’s calculated by dividing net operating income by market value. A higher cap rate may mean higher returns but also higher risk. It helps compare investment options and evaluate income potential.
Vacancy Rate: This shows the percentage of unoccupied or unleased space in a market. Lower rates suggest strong demand, while higher rates indicate oversupply and weaker demand. It’s a way to assess market health and supply-demand balance.
Delivery: In real estate, “delivery” refers to a new construction or development project’s completion, marking its readiness for occupancy. It involves property transfer, signaling its operational state.
Office
Philadelphia’s office market stands strong among top U.S. markets. Its unique employment mix in healthcare, education, and government sustains its resilience. Despite challenges, Philadelphia’s vacancy and availability rates are impressive, with Center City outperforming other central business districts.
Multifamily
Philadelphia’s multifamily market transformed in 2023, with demand retreat and a surge in construction. The market adjusted as projects surpassed demand, causing the vacancy rate to rise. Philadelphia is still able to maintain a lower vacancy rate compared to other metros. Supply-demand dynamics influence rent trends and sales activity.
Retail
Philadelphia’s retail market rebounded, driven by consumer savings and spending. Even still, significant retail space remains available. Converting obsolete properties to mixed-use centers is a trend. The suburban market is robust, attracting tenants. Philadelphia’s affordability lures retailers compared to nearby markets, despite challenges in sales volume.
Industrial
Philadelphia’s industrial market leads the Mid-Atlantic, with high delivery and construction numbers. While annual absorption ranks third, the vacancy rate is rising due to a wave of new projects. Different warehouse sizes experience varying impacts. Financing costs affect sales volume and cap rates.
Philadelphia’s commercial real estate sector exhibits strengths across asset classes, backed by resilience and unique market dynamics.
Meet The Mike McCann Team
Our team of dynamic and motivated professionals consistently keep client satisfaction as our primary focus. Our team of licensed agents are knowledgeable and passionate about Philadelphia’s wide range of neighborhoods and properties. We have been the #1 real estate team in Philadelphia for over three decades, with over 12K homes sold, 3 billion in revenue, and more rewards from the Philadelphia Board of Realtors than anyone else in the city’s history. We target the specific needs of our clients in order to provide them with the resources and expertise they deserve and use our extensive experience to find the ideal location for their perfect home.
Whether you are interested in buying, selling or investing in Philadelphia, the surrounding suburbs, or the Jersey Shore let us be your guide—no one will work harder for you than The Mike McCann Team. Visit our website at mccannteam.com or contact us at Office: 215.607.6007 | Cell: 215.778.0901.
Source: Bright MLS July Housing Report: Mid-Atlantic Housing Market Resilient (prnewswire.com)
