ESI Experts Weigh in on the Future of Philadelphia's Housing Market
Richard Voith; Gina Lavery & Frank Robinson
As the global pandemic challenged the world order and the US economy suffered its biggest blow since the Great Depression in Q2 2020, the housing market in the US and in Philadelphia briefly experienced a decline in spring due to the stay-at-home orders.
After strong housing index growth through February 2020, the Philadelphia Housing Index has been more or less flat in-terms of growth on a monthly basis, though still showing year-over-year growth. (The PHI is an index that developed by ESI to measures arms-length single family home sales price in Philadelphia, adjusting for housing traits to compare like-to-like, differentiating trends by various geographies.) Although many news stories have focused on homebuyers choosing to move to the suburbs for more space due to the pandemic, Philadelphia has been able to maintain its housing value across the city with modest growth despite trends suggesting otherwise.
One drastic difference between the 2019 and 2020 housing market was the volume of home sales within the city. As of November 2020, the total volume of single-family home transactions (arms-length) totaled around 15,600, about 29% less than that in 2019 which totaled around 22,000. 
Although there are the fewer transactions in the city overall, the average sales price remains higher than the PHI in 2019: in November 2020 the PHI was around $177,000; 39% higher than same month in 2019.
The trend of the Philadelphia housing market is not quite the same as the overall market of the US, which has seen more significant gains in recent months. The number of new private homes sold declined since March, but quickly bounced back from May and continued high to the end of 2020. According to the US Census Bureau and the Department of Housing and Urban Development, number of new single-family houses sold in December 2020 (preliminary) were at a seasonally adjusted annual rate of 842,000, which is 15.2% higher than the December 2019 estimate of 731,000. In total, it is estimated that 811,000 new homes were sold in 2020 in the US, which is 18.8% higher than the 2019 estimate of 683,000.
The US median sales price remained high throughout 2020, with the median sales price of new houses sold in December 2020 was $355,900, around 8.0% higher than that in December 2019 ($329,500). Despite the pandemic, home values continued to grow at a significant pace in the last months of 2020, and are showing no signs of slowing down in 2021.
How will Philadelphia's market fair overall and in comparison to the national market? Here's a look at the expectations of real estate experts in ESI for 2021:
Richard Voith, Ph.D., CRE, Principal, ESI: House price growth in Philadelphia has taken a bit of a breather after the rapid price increases in the year prior to COVID-19. Nationally, housing price growth is being fueled, in part by households seeking more space because more are working at home. Philadelphia and many cities are less competitive in providing larger indoor and outdoor spaces. When the pandemic passes (and it will) the city will like see a stronger housing market as more people begin to work away from home and natural desires for congregating activities spur demand for city amenities.
Gina Lavery, Senior Vice President & Principal, ESI: There's still a lot of momentum in Philadelphia's residential market, but most of the activity we've been tracking in the pipeline has been multifamily apartments rather than single family houses. To remain attractive to existing residents and prospective residents, the city will need to capitalize on what makes a place attractive for residents to move and stay: that includes sustaining amenities like a diversity of retail and restaurants but also city services, schools, healthcare and convenient transportation options.
Frank Robinson, MBA, Director, ESI: Overall, Philadelphia's market will continue to gain strength although not at the pace of pre-pandemic levels, making a recovery in 2022. This is based on Philadelphia's prices remaining competitive in contrast to cities such as New York and Washington DC. However, government policies will have an impact on both the amount and type of growth the City will experience. This includes federal policies, involving interest rates. As well as the local policies that impact availability of affordable homes and homeownership programs for low-income and diverse communities.
The updated PHI dashboard below (and available here) allows readers to toggle for a year-over-year view of PHI performance across the city overall as well as by neighborhood. We'll continue updating this dashboard in 2021.
Jing Liu is Associate Director of ANBOUND and Asian Initiatives and a Senior Analyst at ESI. In addition to her expanded role internationally, Jing's specialized skills include spatial analysis, quantitative analysis, and data visualization which remain crucial to ESI's continued success in transportation and real estate, to name just a few areas in which she is involved. Jing is responsible for analyzing and updating ESI's monthly Philadelphia Housing Index (PHI).