Is there a shortage of affordable homes for millennials in Philadelphia?
“ Millennials are forecasted to make up over 50% of homebuyers in 2020—but there frankly isn't enough product for the demand." According to Diane Olick of CNBC, we actually have a shortage of entry-level homes. She suggests that affordability will only get worse in 2020.
A Curbed Philly article written in July 2019 corroborates this observation. Using Zillow statistics, the median entry-level home in Philly is between 200-250K. But, in some of the more popular Millennial driven neighborhoods, finding a home that’s in move-in ready condition, in this price bracket, is a hard find.
Why is this happening? Here are 4 reasons why:
- The low mortgage rates over the past few years have allowed more and more people to enter into the housing market, with greater opportunity to become a homeowner. They gobbled up the good stuff!
- The increase in renovators fixing distressed homes has hit its peak and has slowed down dramatically in hot neighborhoods. Less nice properties hitting the market. Here’s why…
- Those people, investors, and even the city of Philadelphia's Housing Authority who own distressed properties are holding out. For what? I don’t exactly know. But, many hold out or list for overly inflated prices. :(
- Flippers can’t afford to renovate these overpriced distressed homes and if they overpay, they list for over market value or hold on to the homes and rent them. Both scenarios have a strong potential to increase the prices and literally lower the inventory.
Let me share some other recent stats you may find interesting. In a recent search, I found out how many 3 bedroom move-in condition homes there actually are out there. Here’s what I found:
In the most popular neighborhoods NW of CC (19130, 19121) 8 homes fit the bill.
In the SW (19146, 19145) 35 homes are available.
In the SE (19147, 19148) 10 homes.
In the NE (19125, 19122) only 4.
What does this mean for the buyer? It means there may be some stiff competition in 2020. But do not freak out. Let me give you a few suggestions that may help you actually find your dream home.
- My data was based on 3 bedroom homes in good condition. Perhaps you can consider a home that may have only 2 bedrooms.
- If you need a 3 bedroom home but can’t find one, a finished basement can be a great substitute.
- If a finished basement or multiple baths, or gourmet kitchen, or otherwise enhanced home is not available in your price range, remember you can always upgrade it yourself over time. And there is a lot of rewards when you do so. Personally and financially.
- Focus on location and not looks. You can always change the inside of a home but you can’t move it. Do not underestimate the magic of interior decorating either. If you buy an ugly duckling and can not afford upgrades, I have a lot of tips on how to transform an interior. Or consult a professional interior designer. It’s worth it! Don’t let an ugly backsplash or a retro bath, for example, ruin an amazing opportunity.
- On the flip side of that, if your must-haves are too lofty for your wallet, consider becoming a Pioneer! Buy a more affordable updated home in the next Hot Neighborhood. Location is key and there is a much higher potential for appreciation over time in these neighborhoods. That’s Smart!
In essence, if you really want to buy an affordable home and inventory is low, you may need to alter your goals and position yourself to make a few smart sacrifices. Buying a home now is a great idea and it certainly makes financial sense since rental prices are on the rise- up 3% from last year.
Let me share with you more information on how to buy, how to transform a home, or even give you a list of what’s for sale in your favorite neighborhood.