Philadelphia remains a city of homeowners, but it has become less affordable in recent years than it historically has been, according to research by Pew Charitable Trusts, an independent, nonpartisan organization that uses data to investigate and make a difference.
Octavia Howell, manager of Pew Charitable Trusts’ Philadelphia Research and Policy Initiative, stated that the city’s market affordability is changing completely.
“One of the things we were interested in with this research was understanding how market changes were affecting people, and the question was whether people still have access to the market,” Howell noted, pointing out that for African American households, the answer is less encouraging.
According to the report, while the median sale price of an entry-level home decreased between 2021 and 2023, the average monthly mortgage payment for those homes increased due to higher interest rates.
The average mortgage payment in 2021 was $944, while in 2023 it significantly rose to $1,213. This has made Philadelphia a difficult city to buy a home, especially for people with low to moderate incomes.
Low-Cost Housing
In a review of low-cost housing, the research detailed that in 2000, they represented approximately half of all transactions by so-called traditional buyers, who are those who used a mortgage to purchase a home.
In 2021, that figure dropped to 3%. During the same period, more expensive homes increased from 3% of all transactions to 23%.
According to the report, the number of Asian borrowers increased by 157% between 2000 and 2021, while during the same period, the number of Hispanic borrowers increased by 48%, and white borrowers increased by 8%. The African American population had fewer borrowers. Although the research does not delve deeply into the reasons, it details that the number of African American residents applying for a mortgage fell by 64% between 2005 and 2019, more than any other racial or ethnic group.
A Reputation as an Affordable Place
For decades, Philadelphia has had the reputation of being a relatively affordable place to buy a home, at least compared to New York, Boston, Washington, and some other major cities. This reputation has held firm even in an era of rising home prices across the country. But after Pew Charitable Trusts analyzed nearly 700,000 single-family home sales recorded in the city between 2000 and 2021, it found that this reputation might be changing due to various factors that have reshaped the real estate market.
This reshaping of the real estate market has been influenced by several factors, including the gradual population growth after decades of decline, a property tax reduction implemented in 2000 that stimulated new real estate investments, the market contraction following the national real estate crash of 2006-2008, and subsequent years of low-interest rates that attracted many new homebuyers.
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