Housing Trends Issue #1 6.12.2023

Housing Trends

In this post, I will discuss the trends in the local metro areas of Wilmington, DE, and Philadelphia, PA, compared to the national real estate market. If you have any additional areas or specific counties you'd like to analyze, please feel free to comment, and I will include them in this weekly analysis. Before delving into the metrics used to analyze these markets, let's provide a quick overview of what they represent and the implications they have on the overall health of the market.

Median Sale Price: This indicates the "middle" price of homes sold in the current period. 50% of homes sold for more than the median and 50% sold for less than the median. Unlike the average price, which can be influenced by a few properties with exceptionally high or low prices, the median sale price provides a more accurate picture of pricing trends. The chart below shows the change from the previous year, with the current reading provided in parentheses.

New Listings: The chart below illustrates the percentage change in new listings compared to the previous year. Monitoring new listings helps us gauge the supply in the market.

Active Listings: The chart below shows the percentage change in active listings compared to the previous year. It also serves as an indicator of supply.

Weeks of Supply: This refers to the number of weeks it would take to sell the current inventory of homes on the market, given the current sales pace. A healthy real estate market typically maintains a six-month supply. However, due to the low supply in these markets, we measure this in weeks instead. The chart below shows the change from the previous year, with the current reading provided in parentheses.

Median Days on Market: This represents the median number of days a listing remains active until it is marked as pending or under contract. It serves as a strong indicator of demand. A lower number of days on the market reflects higher demand. The chart below shows the change from the previous year, with the current reading provided in parentheses.

List to Sale Ratio: This is another robust demand indicator. A ratio over 1 suggests that properties are selling above the asking price, while a ratio below 1 indicates properties are selling below the asking price. The chart below shows the change from the previous year, with the current reading provided in parentheses.

Percentage of Active Listings with Price Drops: This metric helps measure the balance between supply and demand. It is important to keep in mind that it can be influenced by sellers who list their properties at excessively high prices. The chart below shows the change from the previous year, with the current reading provided in parentheses.

As you can see, Wilmington is outperforming the national market by 4%, while Philadelphia is underperforming the national market by 4%. Let's analyze this further:

Wilmington's outperformance can be attributed to a severe inventory shortage, as indicated by the 17.66% year-over-year decline in active listings and only 8.1 weeks of supply. This scarcity is further reinforced by strong demand, evident from the median days on market being only 10.2 days and the list-to-sale ratio at 1.015.

Philadelphia's underperformance, on the other hand, can be attributed to high supply, with 13.6 weeks of supply. This is compounded by a lack of demand, as indicated by the 8.5 day increase in median days on the market compared to the previous year, currently sitting at 33.6 days.

The significant decrease in new listings across the board can be primarily attributed to the low interest rates that many homeowners have secured. Currently, 92% of homeowners have an interest rate below 6%, which discourages them from selling and assuming a higher interest rate and payment. The demand aspect is subject to debate. In my opinion, Philadelphia's rise in crime rates and high cost of living serve as major deterrents for buyers. However, Wilmington's proximity to larger cities (including Philadelphia), low property taxes, lower cost of living, and 0% sales tax make it an attractive option for buyers.

I welcome your thoughts and suggestions. Please feel free to comment, I look forward to hearing from you!