Is the Philadelphia real estate market shifting? Are we starting a downturn? What does that mean for buyers and sellers in Philly’s real estate market? These are important questions that we need to discuss.
Real estate historically goes through 7 year cycles, but overall throughout the history of U.S. real estate, values grow at approximately 6-8% annually. We are currently 11 years into a 7 year cycle, so an adjustment to level out some or dip slightly is only natural.
Our last “shift” was fueled by the mortgage crisis, and wasn’t a normal market adjustment. Many people are fearful of a bubble/burst syndrome because of living through this. It’s important to remember that these shifts are normal in the real estate industry. We just have to prepare and stay in close touch with what’s going on in our individual market areas.
How do we watch the market? We can look at national trends (below) but what’s most important is knowing what’s going on locally, and specifically for your property.
While July sales were strong in Philly, we are seeing about 50% fewer sales in August this year vs. last year. Inventory is still low, part of the cause of fewer sales. That also means there’s an unfulfilled buyer demand, and along with potential of interest rates rising – that can mean it’s a good time to sell!
The National Association of Home Builders (NAHB) reported a slow down of sales in July.
Recent news from Wall Street also indicates a possible downturn in the market.
For another local perspective, check out Philly.com’s recent article: As home values rise, more Americans fear a housing bubble
What does that mean for buyers and sellers? The fact is people buy and sell homes throughout the various market cycles. And Philly’s market has hundreds of mini-markets, so as I mentioned in my video it’s like asking the temperature of the United States. There’s a number for that, but it doesn’t mean anything about how to plan your day. We have to stay on top of local trends, and specifics related to your properties.
Sellers – if you want to sell, or need to sell, NOW is the time. You don’t want to chase a ball downhill! You must price your property ahead of market trends to maximize the highest net in today’s market. Also, this is a time when it’s important how your property competes. Professional photos and marketing strategies, such as staging, really matter.
Buyers – of course every buyer is afraid of overpaying for their home. It’s important that we closely analyze the opportunity, and factor in local trends. Areas such as Fishtown, Kensington, Point Breeze and Grays Ferry are continuing to gain value and it may still be wise to compete on offers in these neighborhoods. Of course, what your goals are make the huge difference. If you’re buying long term, then slight fluctuations in value shouldn’t be of concern. However, if you’re flipping then a market shift can cut out the profit margin and we have to factor that into our analysis.
What should you do? It’s important to rely on your local real estate expert as your economist of choice.
Rather than rely on news reports which track sales initiated 3-4 months ago, I’ll analyze the number of showings for each price range in your area to see the level of buyer activity, how many properties went under contract, what the saturation rate is and the trend for days on market. Contact me for a private consultation and we’ll discuss in more detail how to accomplish your goals successfully, through any market changes.