By the time Nobel Prize-winning economist Robert Shiller announced his tepid real estate forecast in October, a downturn in the U.S. housing market was well underway.
Mortgage rates were reaching heights not seen in more than seven years. Home-price appreciation was lurching after record-breaking growth. Builder and consumer confidence were tumbling as fewer shoppers snatched up homes, even as builders threw in incentives such as free cabinets and Louis Vuitton handbags.
“This is a sign of weakness that we’re starting to see,” Shiller, the famed housing economist, told Yahoo! Finance on Oct. 30 after his namesake S&P Case-Shiller Index reported that U.S. housing prices continued to cool. “And it reminds me of 2006 … a couple of years before the financial crisis, [when] home prices were starting to weaken a bit.”
Perhaps Shiller should have added “except in Philadelphia.”
As the national housing market was largely sputtering last fall, Philadelphia and some of its suburbs were still enjoying the real estate renaissance that has swept across much of the nation since 2012. While U.S. single-family home sales tumbled to a nearly 2½-year low in October, Philadelphia hit a record for homes sold during the fourth quarter. And while home values fell in some of the country’s hottest cities, including Las Vegas and Seattle, Philadelphia’s values climbed 4.2 percent between October and December compared with the year before.
The Philadelphia area’s fourth-quarter housing strength is a surprising shift for a region that only months ago had seen buyers retreating from the market. During the summer, the region’s Realtors described a new category of “wait-and-see buyers,” who were tired of searching, exhausted from bidding, and hesitant to go all-in on a house.
Lately, however, buyers seem willing to dive into the market again.
Interviews in February with nearly a dozen real estate agents, home shoppers, sellers, and economists, as well as an analysis of data provided by Houwzer’s senior economic adviser Kevin Gillen, revealed that significant demand for home ownership still exists in the Philadelphia region. Real estate agents report that buyers are engaging in bidding wars — and are still waiving important contingencies, such as inspections — to secure properties they want. Sellers are seeing their homes fly off the market. And the number of days that houses in Southeastern Pennsylvania stay on the market dropped to just 25 in December, according to the real estate website Redfin, a nine-year low that is about half of the U.S. average.
Meanwhile, inventory of single-family homes — meaning the supply of properties on the market — is lingering at record lows.