Philadelphia-area experiencing a housing market recession, real estate agents say

South Jersey real estate agent Melissa Young sees houses that wouldn’t have gone for more than $600,00 before the pandemic now sell for $1 million.

It’s a new reality playing out across the Philadelphia area, where the median home sales price in September was 46% higher than it was pre-pandemic, according to data from research firm Bright MLS.

Even as the Federal Reserve increased interest rates to combat inflation, low inventory and high demand have continued to push prices higher in the Philadelphia region. The median home sales price as of September was $355,000, a 7.6% increase over a year before, according to Bright MLS. It marked the highest region-wide percent increase in 2023.

Some pockets of the region are seeing prices leap more than others. In Delaware County, prices rose 17.5% over September 2022 to $324,750. Camden County’s median sale increased 14.4% to $308,750.

Though prices continue to rise, it’s not the hot market that it may seem. Instead, year-over-year sales in Greater Philadelphia were down by 22% to 5,111 in September. It’s made for what Chris Somers, the co-CEO of the Somers Team based in Fishtown, called “a bizarre market.”

“We’re in a real estate recession in regards to activity. . .there’s just not a lot happening,” Somers said. “You have a lot of buyers kind of on strike, you have sellers kind of on strike because they bought a home at a 3% rate and why should they sell and get a 7.5% [mortgage rate]?”

In addition to the steep drop in completed sales, there were 15% fewer new listings in September 2023 compared to the same month a year ago. It’s created an environment where most homes that do go on the market, especially in the suburbs, get multiple offers within a week or so, Somers and Young both said. A steady demand remains, but not enough houses are coming onto the market for an anxious buyer pool. It’s not just an uncomfortable housing market for buyers and sellers, but agents too.

“You’re definitely still seeing that standstill,” said Young, who is director of the Drayton Young Group of Compass. “No one wants to jump to a 7.5% [mortgage rate]. Agents are scrambling to get listings, and it’s great because as soon as you get a listing, it sells.”

The typical home spent 10 days on the market in Greater Philadelphia, a decrease of two days over last year, according to Bright MLS. In Bucks, Delaware, Montgomery and New Castle counties, the typical home spent a week on the market before selling.

In Philadelphia County, however, the median home spent three weeks on the market before selling. September home prices in Philadelphia increased 1.5%, but more than 5% in every other county besides Bucks, Bright MLS data shows. June had marked a year straight in which home prices had fallen or declined in Philadelphia County.

Somers, who is based in Philadelphia, says he continues to see people moving out of the city and creating more demand in the suburbs. Young is also seeing more people coming from Philadelphia to South Jersey. Somers said he calls it “burbmania.” They both pointed to public safety as a main factor that they’re hearing from clients when making the move.

Somers added that an influx of development in neighborhoods like Fishtown and Northern Liberties haven’t been the boon to the city’s market they could be. The projects have primarily been apartments for rent, and despite thousands of units being built, the new developments don’t do much to add to the housing market supply for buyers. It’s just another reason for buyers to stay out of the market, and the transactions to be at a near standstill.

“Unfortunately the question has gone with from why lease when you can own, it’s changed to why own when you can lease,” Somers said.