Want to know why the 2023 summer real estate market is putting so many real estate investors in the driver seat?
This post is all about how you can be a savvy real estate investor during this crazy summer real estate market.
The summer real estate market in the Philadelphia Metro area is known to be the time of year when the housing prices are usually the highest.
And if you’re anything like me, you are looking for the silver lining!
You are going to get a bird’s eye view of how the housing shortage is affecting our market and why the savvy investors are happy.
After you learn about our 2023 Philadelphia area summer real estate market you are going to be prepared to know which questions to ask so that you can make informed decisions regarding your real estate investment.
This post is all about how you can be a savvy real estate investor during this crazy summer real estate market.
2023 Summer Real Estate Market
One thing the last three years has taught us is to not rely on the status quo of what usually is….. or maybe remind us of the fact that the real estate market will eventually change direction.
Let’s take a look at the large market of Philadelphia Metro Area which will include the counties of Philadelphia, Montgomery, Bucks, Delaware and Chester.
Single Family Homes Philadelphia Metro
Below are the single family homes median sale prices.
As you can see the median sale prices have begun to climb again as they usually do in the summer months.
What’s really interesting though is the final sale prices as compared to the original list prices have increased dramatically over the last month.
This appears to be caused by the auction-like atmosphere that has returned this summer. We will talk more about that in a minute….
But, for now, be aware that this is a bird’s eye view of a large market base.
To determine the impact on the market area for a specific property, a more detailed, refined search will provide reliable information to understand the values of the comparable sales within the immediate neighborhood.
For example: if you are trying to figure out what the market prices are like for a 5 year old, detached, single family home located on a half acre within a development governed by a Homeowners Association…. then the search perimeters should reflect similar details within the smaller market area.
The reason for this is that the person who is purchasing this home is not the same person who is purchasing a stand alone home located on 6 acres in the next county. Their needs are different. So the market prices could be different.
The search for information regarding comparable sales and their prices is based upon the attributes that are most similar to the specific house that you are focused on buying or selling.
Condominiums Philadelphia Metro
A condominium does not have a specific style.
You may be surprised at the different types of condos that are out there in the marketplace, right in our own backyard.
RELATED POST: Philadelphia Condo for Sale is Breaking Records
Condominiums are not included in the single family home search results because they have a different type of ownership.
Therefore, we analyze condos separately because, as you can see below, the months of lowest / highest sale prices are different from the single family homes.
You can also see the the final sale prices have been below the original asking prices for a year.
This is a reflection of different needs / different market.
When searching for the sale pricing for a particular condo unit, it’s important to look for factors that influence value beyond square footage, age, and condition such as the condo fees, amenities, utilities, and are there any pending legal issues?
Also, is the condo located within a building? Which floor is it on? What is the view? What are the restrictions?
Multi-family 2-4 Units Philadelphia Metro
Many investors prefer the multi-family homes which include 2-4 separate living units = several streams of income from one property.
The summer real estate market for these properties do not appear to be as quite on fire as the single family homes.
The median sale prices are currently lower than a year ago.
And the price differences from the lowest month to the highest month is more significant.
Notice the spike towards the end of 2022? This past year has shown us many markets that have unusual spikes in the fall / winter of last year. … I will show you why in a moment.
Unlike single family homes, the buyers of multi-family homes are usually more flexible with location…. and the savvy investors will know that certain markets will produce different types of income.
For example, University City in West Philadelphia or West Chester Boro in Chester County both attract college students or professionals working in the area. A typical buyer/investor will pay more for those locations.
If you are looking for pricing indicators for a particular property be sure to look for comparable sales that are most similar in condition, age, site size and income potential.
Summer Real Estate Market Mortgage Rates
According to Freddie Mac the average 30 year mortgage rates have been hovering in the 6% range since November 2022.
Before November the mortgage rates were quickly climbing from the historic lows of 2%-3% in the beginning of the year to 7% in October.
Remember the spike in sales at the end of 2022? That’s the same timeframe we saw some relief from the quickly increasing rates.
This is an excellent example of one of the factors that drive sale prices…. so when you are looking a sales within the last year remember to also look at the interest rates at the time of that sale.
Real Estate for Sale in Philadelphia Metro
Speaking of factors that drive sale price…. let’s take a look at the number of new properties advertised for sale on the multiple listings.
This graph includes all new listings: single family homes, multi-family homes and condominiums in Philadelphia Metro Area.
This summer real estate market has a severe shortage of supply.
It appears that all the homeowners who bought or refinanced at the 2-3% mortgage rates are staying put unless it’s absolutely necessary to sell…. after all, why give up that rate?
The shortage of inventory is causing a higher demand and resulting in creative offers by the buyers who are desperate to find a home.
It has become common for many offers to include waivers of mortgage contingencies and inspections along with escalation clauses and appraisal gap addendums.
This creates an auction type of atmosphere which creates duress.
Combine this with a homeowner who suddenly needs to move, and the list price is tough for the realtors to determine because of the low number of recent sales.
So, many of the homeowners are basing their asking price on an amount they desire to receive depending on their individual circumstances, instead of market based data.
And the buyers are making offers based upon their need to find a house because they had lost out on so many other offers to purchase other homes…. which creates even more duress.
Always be sure to ask your realtor for comparable sales and if the agent is struggling it is not a reflection on their ability – it’s an indication that you are located in an area that is challenging to price and you may want to request an appraisal.
Let’s Build a New Home Instead
Many buyers will consider looking for new construction when they cannot find the home due to the low supply of existing homes for sale.
Surprisingly enough the median sale prices for new construction (of all residential property types) are lower than the same time last year.
Notice that spike again in the fall / winter months?
When looking at a property in a development and determining if the sale price makes sense to you, ask for comparable sales that are built by the same builder with similar upgrades and square footage.
Then, be sure to look at a competing development and compare those prices according to the attributes that contribute to value.
There are also many excellent custom home builders in the Philadelphia Metro area.
The challenge is finding vacant land that is located in an area that allows you to build the home of your dreams.
It’s no surprise that the median sale prices for vacant land is higher now than last year.
But also, remember to compare the land to similar-zoned land sales in the same market area.
Rentals: Summer Real Estate Market
When investing in real estate, you’ll want to keep an eye on the income that it is capable of producing.
Below you will see why the savvy real estate investors are happy.
Fortunately, for most Philadelphia area investors, the rental rates have remained steady in our market area.
Additionally, many homeowners that own more than one property are using that low-rate mortgage they were able to grab and rent their second (or third) property to take advantage of the strong rental market.
I hope you found this helpful!
Here are more graphs breaking down the sale prices according to county which are updated every month.
And the rental graphs by county are also updated monthly.
