Philadelphia’s residential real-estate market was pretty hot in 2018, with surveys suggesting the average price of a home ended 2018 some 11% higher than when last year began. Price gains in some regions, including Fishtown and Passyunk Square certainly helped boost the pace of price growth, as high-quality homes were built in those desirable neighbourhoods.
Those gains were supported by an ongoing imbalance between supply and demand for property across the city, even though mortgage rates edged higher. While demand is still strong for Philadelphia homes, the rise in prices combined with higher mortgage costs to push some regions out of reach for a number of buyers, particularly first-timers.
However, when we take a look at expectations for 2019, there are some good signs for potential home-buyers – first-timers, home-movers and investors. And that’s despite the continued rumblings in City Hall, over the 10-year tax abatement for home construction and renovation.
Up-and-coming neighbourhoods
Even if you’re looking for your forever home, it always makes good sense to buy at a price you’re comfortable with and that you (and the experts) think are ripe for some capital gains. Well, for those of you looking for a home of your own in Philadelphia, there are a few areas of the city that can provide affordable housing and a good chance of rising prices over the coming 12 months or so.
In 2018, Fishtown and Passyunk became firm favourites, cementing their reputations as an area to buy and enjoy everything you could want from a neighbourhood. While its always good to know which areas are the most in demand, it’s also good to have an idea of your up-and-coming regions. Typically, they’re areas on the outskirts of the more popular ones; places where buyers venture if they’re priced out of their first, or even second, choice.
Point Breeze is among those Philly neighbourhoods that has been picked out as one to watch. With trendy bars and proximity to the Graduate Hospital area, its somewhere that still has affordable property and is surrounded by other desirable (read, more expensive) parts of the city.
But, while affordability of Point Breeze residential real estate is good for some right now, that could change as the year goes on, so its worth taking a look at what’s available sooner, rather than later.
Lower Moyamensing, in south Philadelphia, meanwhile, is another spot worth a second look in 2019. Again, affordability here is good for a range of home-buyers. A great selection of places to eat and hang out, combined with easy access to surrounding popular areas and good public transport links in general, work to make this an area that home-buyers and developers are showing real interest in.
30-year mortgage rate falls
We touched upon the rise in the 30-year mortgage rate during 2018. Well, reports provide a positive boost for home buyers, as according to Freddie Mac, the US 30-year mortgage rate edged down to a nine-month low of 4.45% in the week ended January 10th. That’s down from 4.51% in the prior week, although the cost of a mortgage remains above the 3.99% rate it stood at in the corresponding week of 2018.
However, market experts continue to predict that mortgage rates will likely end 2019 at a higher rate than they were at the beginning of the year. Some estimate the 30-year mortgage rate could end the year around the 5.5% mark, while others are predicting a slower gain to around the 5% level.
Either way, higher mortgage rates make buying a home more expensive. That means if you’re serious about buying a property in an area you love and can afford at the start of the new year, it could be worthwhile taking a positive, but bold step and making a purchase before the Government reaches an agreement, normal service resumes and the economy shows signs of further growth in 2019 and mortgage rates begin to climb, once more.
10-year abatement
Another piece of news relevant to Philadelphia real estate, is that while there is still some debate and a little uncertainty over the long-term future of the 10-year tax abatement rule exempting newly constructed or renovated properties from paying little more than land tax, it remains fully in place, for now.
It was widely expected that a 1% tax rate would be introduced to replace the tax exemption. However, this compromise was removed as an option and the 10-year zero tax rate on improved parts of a property, remains.
There’s no question that this programme has been at the heart of a construction and renovation boom across the city of Philadelphia, particularly over the past 10 years. The continuation of the tax relief is also an important detail behind the ongoing mix of rising property prices, still affordable neighbourhoods and investor interest.
That the 10-year abatement is still in place, is yet another reason for home-buyers to make a move now and perhaps begin renovations of their own, where its required. Depending on what works you undertake, you may not feel the full benefit of the abatement rule. However, not having to pay tax on the full value of even a small proportion of your home, is a financial benefit worth looking into further.
The increase in property prices in some regions of Philadelphia has helped ease gentrification across the city. It has also helped to lessen segregation here, that was pretty pronounced just 18 years ago. With all that in mind, right now is the perfect opportunity to take stock of mortgage rates, consider if a renovation project is something that might interest you and go out and visit some new neighbourhoods. We’ll be surprised if you aren’t impressed by what you find, both by the properties themselves and some of the prices, too.