Spiking Rates And “Plummeting Affordability” Have Priced Low Income Homeowners Out Of The Market

Just days ago Zero Hedge reported that rent-controlled vacancies in New York City have soared. And it should also be no surprise that just yesterday they wrote about a mansion outside of Philadelphia that cost $35 million to build, but recently sold for just $9.26 million.

That’s because indications are that Philadelphia, like many other home markets in the northeast, is seeing ownership rates collapse. My friend, and Philly-based realtor Kira Mason wrote this past week about how the city’s affordability issue “just got a lot worse” relative to where it stands against other Northeastern cities. These are her thoughts.

Philadelphia has long been praised for its affordability when compared with other cities in the Northeast. Due in large part to relatively low-cost housing and some very compelling grants and regional loan programs, it has a higher percentage of individuals living in homes that they own than do DC, New York City, Baltimore, Pittsburgh, and Boston. But despite higher levels of homeownership, a key element of wealth-building, over 23% of Philadelphians live below the poverty line (double the US average).

Homeownership is an important piece of keeping that number from getting even higher, and I fear and suspect that the shift taking place in the housing market today will further stratify a Philadelphia that is already starkly divided along class lines.

Even before interest rates made their historic jump above 7% this fall, homeownership numbers in our city had started to decline. In 2019, they were down almost 9% from their highest recorded level of 58.2% in 2006. Many will attribute this shift to developers outbidding first time buyers in Philadelphia’s most affordable neighborhoods. I saw this firsthand in 2020 and 2021; those of my buyers who had the biggest hurdles to overcome on their paths to home ownership were repeatedly losing bidding wars to investors, even when putting forth offers that were significantly above asking price with favorable non-monetary terms.

While wages remained stagnant between 2013 and 2021, Philadelphia’s median residential sales price rose a staggering 80%. If wages had grown at the same rate as did the median sales price, the annual income of the average Philadelphian would have been almost $112,000 in July of 2021: an insultingly far cry from reality.

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