Across the U.S., the least expensive homes on the market are still playing catch-up after losing 30 percent of their value during the housing bust. Meanwhile, top-tier homes are doing just fine. Not so in Philly.
In the Philly metro region, about 50 percent of the least expensive homes have fully recovered from the housing crisis, according to a new Zillow report, while only 30.5 percent of the most expensive homes have fully recovered.
“Philly is different because it’s seen a reversal of historic patterns, since homes in the suburbs have typically been more expensive. But the city has done much better in last three years than suburbs,” explains Zillow senior economist Aaron Terrazas. “So on one hand, while the suburbs remain much more expensive than the city—the median value is about two times than in Philly—homes in the urban area has appreciated more quickly.”
Zillow data shows that home values in Philadelphia have increased by 22 percent since 2014. Suburban homes are up just 9 percent over that same time period.
Currently, the median home value in the Philly metro is $218,000.
On a national level, the priciest homes are faring much better, with 54 percent of homes in the top third of the market regaining or surpassing the value they lost when the housing bubble burst. That’s better than homes in the bottom of the market, of which only 47 percent have fully recovered.
Here’s how Philly and other Curbed cities’ least expensive homes have fared.
Philly isn’t the only city bucking the national trend, adds Terrazas. The least expensive homes in Baltimore, Maryland have also seen a similar recovery post-housing bust compared to high-end homes.
But across the board, Terrazas says there’s one main factor contributing to rising home values, no matter what tier they fall under: A lack of houses for sale.
“Low inventory has really been driving factor of the appreciation we’ve been seeing,” he says. “There are so few homes on the market given the level of demand.”
By Zillow’s last count, there are 15.6 percent fewer homes on the market in the Philly metro than last year. Among entry-level homes, competition is even more fierce than more expensive homes, says Terrazas.
That’s good news for homeowners, who would do well to ride this wave as long as possible, says Terrazas. “We are in a unicorn moment in that inventories are at historic lows. It certainly is in a homeowner’s interest to hold onto something until they absolutely have to move.”
But not all is lost for potential homebuyers. While Terrazas suspects the Philly market will continue to be competitive for awhile, that could change if mortgage rates rise this year. “That is going to limit how much buyers can extend themselves,” says Terrazas. “There’s potential on the horizon.”