Summer Real Estate News!
Make sure you check out information below regarding Philadelphia's Real Estate Tax assessment changes and the increased Homestead Exemption (which saves you $ on your real estate taxes).
Real estate has certainly been a hot topic over the past month and a half... The Federal Reserve's interest rate increase had somewhat of a slow-down affect (especially combined with the very typical summer decline in activity) on the Philadelphia real estate market. We have started to see fewer bidding wars, more price reductions, and an increase in days on market… but we’re also still seeing multiple bids resulting in well over asking price too! So, the question is, what is going on with the market here in Center City?
First, let's touch upon interest rates... we all know that interest rates have been at record lows for almost a decade so when we now hear about 6% rates that feels high in comparison to the 3% we’ve seen (off and on) but realistically 6% is still a pretty good rate from a historical perspective. The good news is that buyers are starting to simply adjust their budgets or their housing expectations to what they can afford, or they are paying points (1 point equals 1% of the loan amount) to secure a lower interest rate as well as choosing Adjustable Rate Mortgages (ARM) where the interest rate is fixed at a lower rate than the standard 30 year fixed rate for a period of 3-10 years. FYI, average 30-year fixed rate mortgages today are just under 6% while 5:1 ARMS have rates in the mid 4% range- not too bad!
With regards to the overall real estate market, I can assure you that over my 19+ years of business in Center City I recall many summers where the market slowed down from the craziness of the spring market. What I am seeing this summer is, to me, very much like a normal summertime market. It seems very slow in comparison to the spring but (admittedly I'm an optimist) I believe there is still plenty of strength in our market for 3 distinct reasons:
- People want to be in Center City. There's no question Philly (like all cities) has its fair share of problems, but the fact of the matter is that to most city dwellers (or would-be city dwellers) the benefits of living in the city outweigh the alternatives.
- Low inventory in Center City. Even after the interest rate hike and the summer slowdown we are still at roughly a 3-month supply of inventory. Typically, even a 6-month supply of inventory indicates moderate price appreciation.
- Development continues in Center City. We see it both within Center City and certainly in the various neighborhoods surrounding Center City- there is construction everywhere! It was actually just announced that even the Philadelphia 76ers want to build a new arena here in Center City. Obviously, this proposal could have its challenges but overall, the investors who are proposing this have done their research and are confident in the long-term Center City real estate market.
In summary, what I am feeling and hearing is that the market is normalizing and a more balanced market is where we are headed. The fact of the matter though, is that no one really knows, but you know where my heart and head is!
I should mention here that it's important to remember that there is not just one singular rule/market that applies to all real estate in Center City. The various price ranges have their own trends and characteristics so for more specific information on your property, neighborhood, or price range please feel free to give me a call or shoot me an email. As you all know I always have a lot to say on this topic!
Please read on for some seasonal tips to consider and some more information about Philadelphia's Real Estate Tax Assessment for 2023 as well as the Homestead Exemption change.
2023 Real Estate Tax Assessments & Homestead Exemption
Philadelphia residents have been fortunate that throughout the first 3 years of the Covid-19 pandemic the real estate tax assessments have remained the same. But for the 2023 tax year, the City has adjusted them again. Some properties have had no assessment increase at all, some dropped minimally, some increased minimally and some have increased by more than 50%. On average though, assessed property values have increased 31% from the last assessment.
If you do not know what your 2023 real estate tax assessment is, click this link and input your address. If you multiply the property's assessed value by 0.013998 (1.3998%) you will get your approximate 2023 real estate tax liability (which is due March 31, 2023). Accordingly, a $500,000 assessed property should expect a 2023 real estate tax liability to be $6,999.
That said, if you are an owner-occupant and are using your Philadelphia home as your primary residence you are eligible for the Homestead Exemption which was just increased from $45,000 to $80,000. The Homestead Exemption will reduce your real estate assessment and ultimately your tax liability. For example, the same property which is assessed at $500,000 (if owner occupied and the owner has applied for the Homestead Exemption), the assessed value will be $420,000 which multiplied by the 1.3998% equals $5879 which represents a savings of $1120 per year.
To apply for the Homestead Exemption all you need to do is complete the application found here. Unfortunately, properties that have tax abatements or are under the Long Term Owner Occupants Program are not eligible for the Homestead Exemption.
If by chance you disagree with your assessed value, I'm happy to be a resource. You should expect a print out of the assessed value from the Office of Property Assessments later this summer or early fall and there will be instructions on how to appeal the assessed value. Please don't hesitate to contact me for assistance as I've been successful when I've appealed previously.
We hope you find this information helpful! As always if you have any questions please don't hesitate to call me at 267-625-4504 or email me at [email protected].