Flashback to October 2018 and Robert Shiller, an economist who won the Nobel Prize, announced a real estate forecast that could be called lukewarm at best. His announcement, though unwelcome, was hardly unexpected since the country's housing market was already seeing a significant downturn. Both consumer confidence and that of builders was sinking as homebuyers seemed to desert the market -- even after being enticed with appealing incentives. After home-price appreciation zoomed along and broke records, it started tumbling. Even mortgage rates were skyrocketing and reaching their high levels in seven years. Shiller even went so far as to say that the housing market reminded him of 2006, just a couple of years before the recession.
Philadelphia: The Housing Market Outlier
Apparently, Shiller hadn't been to Philadelphia lately. The city, as well as some of its suburbs, While the country watched sales of single-family homes cool to their lowest in more than two years, Philadelphia saw their home sales climb to a record high during the fourth quarter.
Both Seattle and Las Vegas -- cities that are understood to be among the hottest in the United States -- saw their home values plummet. In comparison, between October and December 2018, Philadelphia saw their values jump more than four percent when compared to the prior year.
Philadelphia homes are still in high demand with potential buyers sometimes going so far as to engage in bidding wars and even waiving traditional contingencies like an inspection or an appraisal. In southeastern Pennsylvania, the average number of days that a home stayed on the market in December was just 25. This figure is not only the lowest in nine years, but it is also about half of the average seen across the country.
Supply Can't Keep Up With Demand
The number of single-family homes that are on the market is hovering around record lows. A typically healthy market usually has between five and seven months of inventory. What this means is the all the homes currently on the market would sell within that time period if no new properties were listed. Instead, both Philadelphia itself and its suburban markets have just 3.4 months of housing inventory. As of December 2018, Philadelphia had just 4,235 single-family condos and houses for sale. This scenario firmly establishes the city as a seller's market.
While the time between Thanksgiving and Super Bowl Sunday is typically the slowest of the year, it was different in Philadelphia this year. Instead of people staying busy because of the holidays and hibernating until the weather warms up, buyers have continued to look for homes. It wasn't unusual for homes to go under contract in less than one week or to have multiple offers that were more than the asking price over a period of just a few days.
About 31 percent of the housing inventory in the city's metro area is owned by investors which means that the supply of homes for purchase is low. Another reason why Philadelphia was suffering from a reduction in inventory is because of a limited number of new housing units. Since 2012, Houston added 339,000 units while Phoenix built 154,000. In comparison, Philadelphia produced only 80,000 new homes.
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