This time last year, the Main Line housing market was in a tizzy, with multiple bidders competing for a limited number of listings. These days, buyers still outnumber sellers, but as the frenzied sellers’ market moderates, cooler heads are prevailing. Though homes are still going for above asking price, bidding wars are less common and less heated—and buyers are unlikely to waive inspections and pay closing costs. “I had three closings last week, and every buyer had a home inspection,” says Angela Berke of Keller Williams Realty in Ardmore. “We’re returning to normalcy after more than 18 months of craziness.”
While home values in California and Florida are experiencing double-digit price decreases, our region’s healthy job market and tradition of stability are insulating the area from a meltdown in values. Prices are holding steady, whether it’s condos in Bala Cynwyd, townhouses in Wayne or stone manor houses in Villanova. “Professionals get transferred here, and they feel like they’ve landed in a Norman Rockwell painting,” Berke says. “Schools are great. It’s a strong, stable market.”
Inventory remains low, even for rental properties—and rising interest rates are eroding buying power. Local realtor John Duffy has been in the business for 50 years. In 1986, he was quoted in Time magazine, commenting on mortgage interest dipping below 10% after a decade of soaring rates. “Back then, I said 9% interest would be great for the home market, never dreaming rates would someday drop under 3%,” he says.
At the start of 2022, a 3% loan seemed like the new normal. But by mid-year, interest rates more than doubled to 7%, before easing back into the mid-5% range. “About 5% is what I’d call a normal market,” Duffy says. “Still, the higher the rate, the lower the buying power.”
Indeed. Someone who borrows $500,000 on a 30-year mortgage at 3% interest can expect a monthly payment of $2,108 before property taxes and homeowner’s insurance. At an interest rate of 5.75%, the payment swells to $2,918, an increase of $910 a month or $10,920 a year.
To mitigate higher rates, some are turning to a 15-year mortgage, where the interest rate is about .75% lower. The borrower also pays down the principal on the loan faster. “The monthly payments are more expensive, but for many people, it’s the way to go, especially if you add a little extra money to your payment every month,” says Duffy.
A growing number of people are reducing their monthly payments by putting down more money on a house and borrowing less. “We’re seeing a lot of parents and grandparents chipping in to help,” Duffy says. “They want to see the next generation enjoying the family’s prosperity while they’re still alive.”
Higher interest rates are having a profound impact in regions where sales are especially volatile. While home prices in San Francisco are down 13%, prices in Philadelphia and the Main Line have slipped just 1.2%, according to the Black Knight Home Price Index.
In the driver’s seat for nearly two years, sellers are getting used to the reality of a more moderate market. “There isn’t that same feeding frenzy,” says John Bell of RE/MAX Integrity in Chadds Ford. “We tell people not to expect 10 offers and $100,000 above asking. If the house is move-in ready and in a desirable location, you might get two offers and $10,000–$20,000 over asking.”
In the current market, buyers are more likely to make decisions based on logic rather than emotion. “Now that there’s less competition, you can actually make an offer based on what you think the house is worth and get an inspection to make sure you are getting what you expect in terms of condition,” says William Holder of RE/MAX Classic in Wayne.
Meanwhile, low inventory continues to buoy demand. Competition is especially fierce for starter homes, with four immediate offers on a townhouse in Devon priced at just under $400,000. Havertown also is a hot pocket for first-time buyers.
Location remains at the top of the wish list for prospective buyers. “Schools are number one. Second is walkability, where kids can trick or treat and there’s a sense of community,” says Berke. “Ardmore is very popular right now. So are Wayne and Narberth.”
Top-notch schools are a big draw for buyers at the Estates at Chadds Ford, an upscale development in the Unionville district, despite price tags of $1 million-plus. “When something comes on the market, it goes in a day,” Bell says. “Buyers are focused on getting into a home and refinancing in a few years if the rates drop.”
Justin Starzyk recently moved from Denver to the Main Line with his wife and two young children. “We chose the Main Line so we can be close to aging parents and our children can grow up near their cousins,” he says.
Starting his search online, Starzyk soon learned he needed boots on the ground to navigate a complex market. He turned to Mike Duffy to lead the charge, sending him off with a healthy budget and a wish list that included a large home with character that’s walkable to schools, parks, public transportation and downtown shops and restaurants. The family found their dream home in Wayne, a 130-year-old stone manor house. With 4,500 square feet of space and seven bedrooms, it was a little larger than they needed—and at $1.85 million, it was a little more than they planned on spending. “But it was our perfect location, which was a great reason to stretch above our budget,” Starzyk says. “Mike negotiated hard for a home inspection, and we wound up getting concessions from the seller that contribute to the home’s value.”
Starzyk’s advice to prospective buyers: “Be patient relative to the inventory and work with a realtor who takes the time to know you and has lots of relationships. When the perfect house comes on the market, you can jump all over it.”
Related: 6 Quick Tips for Buying Your First Home on the Main Line