6 Reasons Savvy Investors Are Buying Philadelphia Real Estate

6 Reasons Savvy Investors Are Buying Philadelphia Real Estate

  • Douglas Pearson
  • 08/21/22

Are you considering investing in luxury condos in Philadelphia? Right now is one of the best times to jump into the Philadelphia real estate market, especially in the midst of the COVID pandemic. Local luxury real estate agent Douglas Pearson describes some of the top reasons investors purchase Philadelphia investment properties.

COVID has led to more opportunities

The COVID-19 pandemic has led to more opportunities to purchase luxury condos in Philadelphia for a number of different reasons. Prior to the pandemic, many real estate investors focused on purchasing properties in strong employment areas, but the COVID-19 pandemic has shifted the way that people work toward virtual or remote work rather than in-person work.

This opens up the opportunities for investing in Philadelphia real estate since employees are willing to live further away from physical offices. Many employees are working from home full-time, while others are only going into the office once or twice per week or even month, which means they can live almost anywhere.

More inventory is on the way

Inventory is actually on the rise, and investment opportunities are not just limited to rural areas. The COVID-19 Relief Bill’s federal unemployment benefits expired in September 2021, and the reduced household income caused many homeowners to begin missing mortgage payments. In turn, the housing inventory is rising since many owners and families are selling their homes to avoid foreclosure.

There are also millions of homeowners in forbearance, meaning that they have an agreement with their mortgage companies to suspend mortgage payments for the time being during the COVID-19 pandemic. Forbearance typically happens during short-term emergencies, such as job loss or illness, but it can also happen during long-term situations like global pandemics. That being said, many of these forbearances have either already expired or are set to expire soon, which means that there should be more inventory soon as more owners go out of forbearance and sell their homes.

Interest rates are historically low

While home prices are on the rise, mortgage interest rates are low, which can factor just as much into purchasing real estate as home prices do. The average home price in the United States was just $66,000 in the 1980s, but mortgage interest rates were a whopping 13% or higher. Cash flow was also very tight back then, qualifications for investors were very strict, and the mortgage payments were higher because of the lofty interest rates. Today’s mortgage interest rates fall under 5%, and qualifications for investors are fairly favorable.

One of the drawbacks of low-interest rates is that they can lead to inflation, but real estate investors purchase Philadelphia investment properties to decrease their cash savings as a hedge against inflation. Rental real estate properties are a great way to make extra money when the economy is slow, and they also protect against inflation since money is invested into real estate rather than staying in a bank account where the dollar is devalued.

Home prices will keep increasing

Everyone knows that homes tend to appreciate in value over long periods of time, but many buyers let the shorter-term fluctuations in home prices keep them from investing in real estate. The true investors and experts know that home prices will only keep increasing over the long term. Think two or three decades. Buying a Philadelphia investment property now will help you play the long game and make a profit over the next few decades.

Both home prices and rents increase when there’s more demand than supply from both renters and home buyers. The housing market appreciates when there is a growing population. And since the United States population continues to grow, home prices and values will only keep increasing over the years. Experts predict a population of approximately 400 million in the United States by 2060, which will only increase the demand for housing. That’s why it’s best to invest in Philadelphia real estate now.

Rent is on the rise

The housing market in the United States is prohibitively expensive for many Americans, which means that both current and future generations will likely need to rent their homes long-term. Homeownership rates are on the decline in the United States, with rates at 63%, meaning that the nation ranks in the lowest 20% of nations for homeownership. Countries like India and China rank at 86% and 89%, respectively, while other developed countries like Germany (53%), Britain (56%), and France (63%) are struggling to keep up when it comes to homeownership.

This decline in homeownership and the increasing population will place more pressure on the home rental market in the United States. Now is the right time for investors who have the means to purchase condos and other homes to buy them and rent them out to the growing number of renters.

New construction fails to keep up with demand

There are fewer home builders on the real estate market today due to the risk of losing money, and new home construction is failing to keep up with the increased demand for homes. There are a number of different economic factors that contribute to the gap between the nation’s current housing demand and the number of new homes being built.

These economic factors include rising labor costs and home construction materials, slow infrastructure processes and planning, and the reduced profitability of building mid-range homes to sell to the average American family. This lack of new construction and increased home demand means that home prices may continue to increase for the next several decades. Since there is an increased demand for homes not being met by new construction, now is the perfect time to invest in Philadelphia real estate and rent to families that would otherwise be buying homes.

Are you looking for luxury condos in Philadelphia? Reach out to trusted Philadelphia real estate agent Douglas Pearson for guidance.

Work With Douglas

With decades of sales and marketing successes behind him, Doug Pearson is a leading Realtor in the greater Philadelphia area and a top salesperson in Kurfiss Sotheby’s International Realty. He has extensive experience selling new construction and land along with estate homes, city condominiums, and investment properties.