Philly housing market still hot, more inventory expected as interest rates rise

PHILADELPHIA (WPVI) -- Homes have been selling like hotcakes, flying off the market the last few years as interest rates remained at record lows.

"It was a frenzy. You had buyers, 10,15, 20 offers on properties, and buyers bidding over asking price on almost most homes," said Maria Quattrone, owner of Maria Quattrone and Associations and RE/MAX @ Home.

However, that's all changing as the Federal Reserve tries to curb inflation. Interest rates have jumped up to 5%, meaning buyers can afford less house and have to re-evaluate how much they can afford.

"You could have been approved for an interest rate of 3%. And that interest rate, depending on your purchase price, could have been $1,500 a month. But now at 5%, the payment may be more like $1,800 or $1,900 a month, and that may price put someone out of buying a home at that price," said Quattrone.

Economists at Zillow say the dwindling supply of homes as a result of the 2008 Great Recession has led to the current explosion in house prices, which increased 32% in the past two years.

In Philadelphia, the median sales price last month was $286,500, up 7% from last year. Nationally, the increase is 15% over the same time period.

"We're entering this market with really low inventory based on the fact that we haven't had very much construction," said Nichole Bachaud, Zillow Economist. "We also have really high demand because we have millennials aging into their prime home-buying years. We have baby boomers, which is a huge generation, that is downsizing and retiring right now."

As for what's next, local realtors say the next few months should improve for buyers.

"We're going to see a little bit of a shift in the market whereas there's still low inventory, but we expect more inventory to come on the market this spring," said Quattrone.