Ok, the Compass 2023 Annual Market Report is out.

Let me quickly get one thing out of the way that I point out every year:

The specific neighborhood data is based on smaller sample sizes and does not indicate whether a neighborhood is actually increasing or decreasing in value. One major reason for this is that the year-over-year is typically not comparing apples to apples. For example, the average sale price in Old City dropped from $550,000 in 2022 (143 sales) to $463,000 (94 sales) in 2023. Does this mean Old City property values declined 16%? Absolutely not. These numbers do not report on property values. They are showing the average sales price for a small number of properties. The batch of 2022 properties were most likely nicer, larger, more updated, and/or better located. That is what would account for such a significant discrepancy. This applies to neighborhoods with appreciation as well.

What is significant are the city-wide numbers as a whole. Because that is a substantial sample size, what these numbers show is exactly what I would have expected. The number of residential sales in Philly was down 18% in 2023 (year-over-year). Average sale price was down 1.5%. Days on Market were up 26%. This all makes sense. Interest rates increased from the low 3’s to as high as 8. More than doubled. Added to (and partly caused by) that was the insanely low inventory. Typically, high interest rates would drive prices down, while a dearth of inventory would send it upward. Now, picture those two factors canceling each other out, and you get pricing that is basically flat.

Now, take flat pricing, higher interest rates, and less for sale, and you will simply get fewer buyers who can afford the scant number of available homes. And more picky buyers adding to the days on market. There are many details and nuances that I could discuss further, but these are the basics.

Now, let’s have some fun with these small neighborhood sample sizes. For example, what were the five highest-priced Philly neighborhoods based on 2023 sales?

Rittenhouse Square—$1,000,000
Chestnut Hill—$985,000
Society Hill—$859,000
Graduate Hospital—$683,000
Queen Village—$631,000

I have a question for Compass. Why is Fitler Square not a listed neighborhood in this report? Fitler would clearly be in the top 5. And where is Bella Vista? Probably not top 5, but would certainly be up there with some of the honorable mentions. And how about Graduate? What a solid neighborhood. Graduate followed the general pattern of the city as a whole—number of sales down 24.6%, prices up 1.2%, and DOM up 53.3%.

Keep in mind that every neighborhood also has micro-neighborhoods with pockets of higher-priced and lower-priced homes, so of course, your neighborhood’s numbers may not track with your actual immediate area.

What neighborhoods had the lowest number of sales in 2023?

University City—53
Chestnut Hill—82
Old City—94
Society Hill—96
Wash West—98

The number of sales is a combination of neighborhood size and the amount of housing stock, as well as specific inventory issues. By the way, Fitler Square would have made this top five as well! Also, certain huge geographic areas would have very different dynamics if they were split up by common lines of demarcation, such as East & West Mt Airy and Roxborough & Manayunk, which are lumped together.

Anecdotally, for 2024, rates are down about a point (plus they are less of a buyer shock), inventory seems slightly up, buyer demand seems up, and prices remain stable or are appreciating. Whether pricing is going up very much depends on house vs. condo, location, condition, and other specific factors. It is nuanced and quite case-by-case. As a general rule of thumb, a renovated or updated house in a prime location is currently seeing the most appreciation.

Most importantly, you cannot time the market or make generalizations about value. The best time to sell is when it is best for you and your family. If you want to discuss pricing or your timing, please contact me directly.

This weekend will be one hour shorter as we turn our clocks ahead, so make the most of it and have a great weekend.

Warm regards,

Jeff

As always, please know that I’m humbled by and appreciative of your introductions and referrals. If you have a friend, colleague, or family member that is in need of Expert Real Estate Representation, please have them contact me.

Be assured, I will do my best to exceed their expectations! Thanks for taking the time to read this issue of Around the Block.

Jeff City Block

City Block Team
Assoc. Broker
M: 215.833.7088
O: 267.435.8015
[email protected]