Eager home buyers are facing a challenging Doylestown, Pennsylvania real estate market but signs point to a less competitive climate come summer
How did we get to where we are now in the Doylestown, Pennsylvania real estate market? During the pandemic, a growing number of workers were forced to work from home, causing a spike in renters and first-time home buyers across Doylestown, Pennsylvania. The disparity between supply and demand created one of the hottest real estate markets in history. Today, the impact has forced the Pennsylvania housing market to push home construction to meet the rising need for both multi and single-family dwellings. The number of homes constructed has spiked to the highest number recorded since 1973.
The Red-hot Seller’s Market
According to a housing report from the Pennsylvania Association of Realtors, house prices have spiked 14.6% in the last year and will continue to rise in 2022 and 2023. Home prices in the Pittsburgh Metro area have grown 13.5% in the last year and should grow another 16.3% in the next year.
Things are moving quickly for both buyers and sellers as low mortgage rates, dried-up inventory, and robust demand work together to heat up the competition. COVID-19 impacted both the financial and real estate markets as countless homebuyers went on a buying spree, resulting in the largest home sales in over a decade.
Millennials are now buying their first homes, growing the impact on the already sizzling real estate market. At the same time, mortgage rates are likely to increase into 2023. While the market will eventually return to normal, the Pennsylvania market will continue to lean towards a seller’s market.
Steady Home Price Growth
The value of Doylestown, Pennsylvania properties has increased almost every month over the past year. The market will take time to return to normal, and home inflation will not revert to the levels experienced prior to the pandemic until 2023. The pandemic is likely to indefinitely increase the floor for home values across not just Pennsylvania but the whole country.
According to Fannie Mae, by the middle of 2023, the average cost of a previously owned house will surpass $400,000. The median new home price will reach a new high of $464,000 by 2023, about $100,000 more than at the beginning of 2021. The luxury real estate market across Doylestown, Pennsylvania will experience similar growth.
The current real estate market in Doylestown, Pennsylvania is still on the rise, with home sales jumping 32% in the most recent PAR housing report. Housing is still in high demand, and inventory remains low. Part of the inventory problem dates back to 2008, when builders either stopped constructing new homes or dropped out of the business completely, adding to the shortage of homes we see across Doylestown and the rest of the country today. Add the influx of new millennial homebuyers to the equation, and the balance between supply and demand heavily favors the latter.
The Next Phase of the Market
The market’s patterns are the result of historically low mortgage interest rates and shifts in home preferences. Mortgage rates are expected to rise for the rest of 2022 and into 2023 due to consistently rising inflation. However, the market will stall as mortgage rates rise, making the tail end of 2022 and the beginning of 2023 a better time to buy.
We also see more buyers priced out of the market with fewer housing options to choose from and rising mortgage interest rates. First-time buyers without substantial savings to back them are especially feeling the tightness of the squeeze. Competition is also fierce, with a growing number of buyers waiving contingencies to stand out in a pool drowning with multiple offers. It’s great news for sellers but an uphill climb for buyers.
The good news is that experts forecast no sharp decline in pricing. A cooldown is more likely than a huge sharp drop. Home prices should continue increasing now and into the next couple of months.
The next few months should also bring more options as the Doylestown, Pennsylvania real estate market slowly begins to shift away from a red-hot seller’s market and toward a more balanced market.
Where We Go From Here
The trajectory of rising mortgage interest rates and record-setting home price growth will together force more buyers to drop out of the market, lowering the heat of competition across the Doylestown area. The other key driver behind the shift is the accelerated pace of home builders, who are building houses faster right now than at any time over the last 16 years.
Doylestown buyers are not just paying above the asking price. Some are waiving home inspections and other contingencies. There’s no shortage of buyers offering quick settlements, nor is there a lack of buyers who are unwilling to let the seller stay in the house for free for a few months until they find another home.
As home prices rise and inventory remains low, mortgage interest rates are climbing higher than before the pandemic-induced real estate boom way back in late 2018. Rates flew past the 4.5% mark with no signs of slowing down. The simple laws of supply and demand have kept the Doylestown market busy over the last two years, which is usually something that only happens in the spring.
The Housing Inventory Situation
Most experts forecast the housing supply to increase this summer, bringing more balance to the market. Buyers searching for properties in Doylestown, Pennsylvania should already be seeing more homes cycle through than last year. Sellers reluctant to list their homes because of the health risks of the pandemic are also starting to feel more comfortable entering the real estate market. More empty nesters are moving into condominiums, which will bring more inventory to the otherwise tight Doylestown market.
As more properties come on the market in the month of May, the buyers are already here.
The promise of a really good price is also convincing more homeowners to put their homes on the market. However, some homeowners would rather not sell in order to avoid being a buyer in one of the most challenging real estate markets in our history. Some plan to sell their homes and rent for a year until the market adjusts.
The promise of a really good price is also convincing more homeowners to put their homes on the market. However, some homeowners would rather not sell in order to avoid being a buyer in one of the most challenging real estate markets in our history. Some plan to sell their homes and rent for a year until the market adjusts.
The Mortgage Rate Factor
The impact of rising mortgage rates on demand will remain a key factor over the next few months. Mortgage rates are the wild card, which grew faster this year than we forecasted. The implications of higher mortgage rates on the Doylestown market are just starting to show.
The average interest rate for a 30-year fixed-rate mortgage was 4.67% at the end of March, according to Freddie Mac, which is up from 4.42% the previous week and 3.18% a year ago.
In a typical real estate market, rising mortgage rates mean less demand, fewer people applying for mortgages, and more sellers reducing their listing prices. However, buyers can still feel the intensity, bidding against investors, all-cash buyers, and migrants from expensive cities who are less sensitive to mortgage rates. Signs already point to a shift in the market, with home price growth starting to slow in the coming weeks and months.
Things Still Feel the Same
Despite the signs of less demand in the near future, it’s hard for buyers to see or feel any difference in the market right now. Frustrated buyers, tired of losing bid after bid for home after home, are simply giving up. Many buyers are waiting for conditions to improve, which should happen as more buyers push back. However, not much will change in the Doylestown area over the next few months, especially as buyers race to purchase before mortgage rates rise even higher. The higher those rates go, the cooler the water will be for buyers.
Crunching the Numbers
Pennsylvania’s home prices increased by 10.5% year-over-year, with homes seeing approximately $30,000 in increased value. Despite the rising home prices, Pennsylvania is still more affordable than its neighboring states, with an average home cost nearly $70,000 lower than the country’s average home price.
As of November 2021, there were only 19,970 available homes on the market, and buyers will continue to struggle with low inventory as 2022 unfolds.
The average rental price throughout Pennsylvania increased by 19.1%, landing at a mean of $1,913 per month. However, large metro areas like Philadelphia and Pittsburgh saw rental prices decrease. Pittsburgh’s average rent dropped by 2.7%, while Philadelphia’s average rent dipped by a staggering 11.2%. Despite renters and buyers struggling to stay afloat, Doylestown homeowners are sitting comfortably.
The Economy Bounces Back
Delinquency rates across the state remain low as Pennsylvania’s unemployment rate continues to improve, indicating a steady bounce back after another tough year caused by the pandemic. As opportunities return and the economy heals, experts forecast these data points to drop further in 2022. Pennsylvania’s steady drop in unemployment is another good indicator of economic healing.
It’s Still Great to Live in Doylestown
The change in lifestyle many homeowners experienced during COVID-19 motivated countless folks across Pennsylvania to seek out more space through housing outside of the city.
The state’s vast natural beauty promises greener pastures, fresher air, and perfect countryside. Compared to the rest of the country, Pennsylvania ranks first in craft beer production, third in pharmaceutical export, and tenth in best states to live. Boundless outdoor space, affordable housing, close communities, and steady work add to the appeal.
Despite the turbulence of the pandemic, Pennsylvania’s manufacturing output remained steady in 2020, continuing its climb since 2010. Top industries have shifted, with the majority of residents employed in healthcare, manufacturing, or retail-related industries, each one offering the promise of steady employment, which acts as the backbone of the state’s economy.
