Housing has been a bright spot in a pandemic-battered economy, but a low supply of homes continues to hold back the market. More homes are expected to be listed this spring, but it won't be enough.
Realtor Jason Ostrowsky bought a house in Ambler right before Christmas for $25,000 over the asking price. A house around the corner sold for $51,000 over asking. His mother’s house in Towamencin Township, Montgomery County, fetched an extra $31,000 last year.
“Navigating this market, I think, is a challenge for both buyers and sellers,” said Ostrowsky, an agent with Berkshire Hathaway HomeServices Fox & Roach based in Montgomery County. Throughout the $300,000 to $800,000 price range, he’s seeing buyers paying tens of thousands of dollars over listing prices to win bidding wars as demand stays high and housing supply hovers at record lows.
Although the housing market has been a bright spot in a pandemic-battered economy, the limited supply of homes for sale continues to hold back the market. The number of homes for sale nationally in February was down almost 50% — about 496,000 homes — from the same time last year, hitting a new low, according to Realtor.com.
In the metropolitan area that includes Philadelphia, Camden, and Wilmington, active listings were down 46% in February from the same time last year, according to Realtor.com. New listings were down 29%. In Montgomery County, the number of listings is the lowest Ostrowsky has seen in 15 years.
“We truly are in a listing crisis right now. We need homes to sell,” Ostrowsky said. “If I could beg people [to list], I would.”
While demand during the pandemic has been robust and the population of potential first-time home buyers has swelled, new home construction has not kept up, and sellers have been more hesitant to list their existing homes, said Danielle Hale, chief economist at Realtor.com. The cold and snowy month of February further drove down housing supply. The number of homes on the market does tend to dip most between December and February and usually climbs through May.
“We are expecting to see that this year,” she said. “But we’ve got a pretty big deficit to dig out of.”
And real estate agents don’t think supply will catch up with demand any time soon. New listings nationwide hit a new low, as well. During the first two months of 2021, about 207,000 fewer homes were newly listed than the average during the same time over the last four years, according to Realtor.com.
A little more than 2,500 houses were listed for sale in Philadelphia in the last quarter of 2020, down from roughly 3,600 in the previous quarter and the first time the supply of homes for sale has dropped below 3,000, according to analysis by Drexel University economist Kevin Gillen. Historically, the city has had an average of about 7,400 houses listed for sale in a given month.
Agents and economists anticipate that more sellers will be willing to put their homes on the market as more people receive COVID-19 vaccinations. With more active sellers, Hale said, she expects home prices will grow at a slower rate. Slightly rising, but still low, mortgage rates could help limit price growth, too, as sellers look to stay competitive.
The median national home listing price rose nearly 14% in February from the same time last year to $353,000, higher than the peak price last year, according to Realtor.com. Listing prices rose the most in the Northeast, where median prices were up nearly 17% on average compared to February 2020. In the Philadelphia metropolitan area, the median home price jumped almost 12% to $329,900.
The average price of homes in the city of Philadelphia rose 5% in the last quarter of 2020, and prices were up an average of nearly 13% in 2020, according to Gillen. From the same time in 2019, prices rose more than 22% in West and Southwest Philadelphia, 17% in North Philadelphia, and nearly 16% in Northwest Philadelphia.
The number of home sales in Philadelphia rose to roughly 6,000 in the fourth quarter of 2020, up from more than 5,300 in the third quarter, and roughly 3,100 in the second quarter, according to Gillen.
Ostrowsky, the Montgomery County Realtor, said a recent client was very concerned about potential buyers bringing COVID-19 into the house.
“I said, ‘Look, just give me one good weekend,’” he said. “Because I knew the house was going to go.”
After that weekend, the seller received several bids and accepted a cash offer over asking price.
Some home owners want to list their properties for sale but fear they won’t be able to find a replacement, especially because low housing supply means sellers can weed out those who cannot buy until they sell their own home. That’s the sentiment of several clients of Darlene Meekins, a real estate agent at Realty Mark Associates. A New Jersey couple she has been working with for about six months wants to move to Pennsylvania to be closer to grandchildren but is attempting — and struggling — to find a home in the $300,000 range to buy before considering selling.
Trying to buy homes in the current market seems to be as difficult as trying to get COVID-19 vaccines now — many more people are interested in getting them than can get them, said Meekins, immediate past president of the Philadelphia chapter of the National Association of Real Estate Brokers, the country’s largest Black real estate trade association.
“It’s very difficult for the low to moderate” market buyers, said Meekins, who operates mainly in Philadelphia and Bucks County. “There really isn’t much” available for them, especially below $200,000.
Because of the competitiveness of the market, some buyers who haven’t been able to outbid rivals in the $300,000 range have looked a step down.
“They kind of downsize their expectations, and they can compete with those low to moderate [buyers] and pay more than what people are asking,” Meekins said. That makes buying more challenging for people who can afford only the lower price range. Her advice for buyers: “Search for funding if that’s what you need. So you can compete.”
For example, in early April, the First Front Door program offered by member banks of FHLBank Pittsburgh is opening a new round of funding to help first-time home buyers throughout the state pay closing costs and down payments.