From the Philly Inquirer:
Even before she and her husband started seriously house-hunting for their first home, Nicole Benson Paul had heard the stories of Philadelphia’s cutthroat real estate market.
There were reports of crazy bidding wars, as buyers sparred and scrapped for limited homes. Home prices seemed to be rising each month in most neighborhoods. At the start of this year, as the newlywed couple started to browse, listings that interested them flew off the market before they could even schedule a tour.
In the red-hot housing market that Philadelphia has been experiencing, it would have been no surprise — understandable, even — for Paul and her husband, Zach, to succumb to the trend that has captured thousands of city residents in the last few years: diving head-first into the market, voraciously bidding for properties, and overpaying or waiving contingencies to obtain a home when necessary.
Instead, the Pauls are part of what Philadelphia real estate agent Ashley Lauren Farnschlader calls the new “wait-and-see” buyers — a new category of house-hunters who are tired of searching, exhausted from bidding, and hesitant to go all-in on a house. Whether they are skeptical about where the market and economy are heading, recovering from buyer fatigue, or simply waiting to find the right home at the right price, many Philadelphia buyers are no longer clamoring for homes the same way they did in 2016 and 2017, local agents say.
“Buyers are buying smarter,” said Dylan Ostrow, an agent for Berkshire Hathaway HomeServices Fox & Roach in Center City, who helped the Pauls buy their first home in June. “I’ve told so many different clients … ‘We can wait for the right property. Something will come along priced correctly.’ ”
According to an analysis of the single-family housing market in the second quarter of 2018 — meaning April, May, and June — Philadelphia economist Kevin Gillen found that the increase in home values citywide significantly slowed for the first time in more than four years. Compared with the year before, home values in the 2018 spring season — typically the hottest market of the year — appreciated 0 percent, Gillen found, analyzing data provided by Houwzer and the city’s Recorder of Deeds.
In other words: The typical Philadelphia home is worth no more today than it was one year ago
For a market that has experienced seemingly unstoppable jumps in home values since Philadelphia’s housing recovery began in 2012 — home values are now 19 percent higher than the city’s previous peak during the housing bubble in 2007 — the sudden plateau in values is a surprising and puzzling shift, especially as supply remains low and demand remains high. Notably, the number of homes on the market in the second quarter fell to an all-time low, with just 3,460 homes listed at the end of June — a phenomenon that should push prices up. At the same time, Gillen’s data show, the number of sales climbed to 6,460 in the three-month period, the highest in a decade.
The unusual mismatch between buyer demand and home values has left economists and real estate agents with one big question: Is Philadelphia experiencing a momentary cooling, or could this be the start of a downturn?