Philadelphia, PA - Home prices in Philadelphia rose by a staggering 11.3% in 2021, keeping in line with a global housing shortage that's sending prices sky high just about everywhere. In order to help first-time homebuyers enter the soaring market, the city of Philadelphia has created a program that will build at least a thousand affordable homes.
Thousand Affordable Homes Being Built In Philly
Entitled "Turn the Key," the program cleverly sells lots of private land to home developers at a discount, provided those developers agree to build appropriate homes and sell them to the right applicants. In addition to limiting applicants based on income, the city also plans to offer subsidies to enable residents who earn as little as $70,875 to purchase one of these $190,000 to $200,000 homes.
The Philadelphia Housing Squeeze
While cities around the world have been affected by a surge in demand for housing, Philadelphia has been hit especially hard. The number of homes for sale has fallen to 59% of pre-pandemic levels, resulting in the lowest availability of houses in a decade. Combined with low mortgage rates, this shortage resulted in prices skyrocketing by nearly 13% in both 2020 and 2021. As home prices go up and down, payments go up too, meaning families that can easily make the monthly mortgage payment might have trouble getting a down payment together.
To help offset this, the city has been running a program called Philly First Home for several years, giving first-time homebuyers a grant of up to $10,000 or 6% of the home's purchase price, whichever is lower. In order to be eligible for this grant, homebuyers must make less than 120% of the median income of their area and complete a handful of educational workshops. The city considers the Philly First Home program a great success. It's helped hundreds of Philadelphia residents purchase their first home in a seller's market while providing valuable education that helps to ensure that the homebuyers know what they're getting into.
Leveraging the Housing Market
For residents of Philadelphia who already have purchased a home, the rising market offers unique opportunities when it comes to refinancing. Current Fed activity has caused interest rates to increase slightly, but the rapid increase in the value of homes means that most people with mortgages will have much more equity to borrow against. This is usually a good thing. Refinancing your home can give you the liquid capital you need to explore other investments, put someone through school, or even purchase a second home. Even if you've got a bad credit mortgage, the rising value of your home will make refinancing a solid option to get some cash in hand. It's tricky to do a straight cash-out refinance with a credit score below 620, but you can still take advantage of the changing market and adjust your loan terms. No matter what your credit score is, it's worth talking with a banker about what a refinance can do for your mortgage.
Giving Philadelphia Homebuyers a Boost
Programs like Turn the Key and Philly First Home provide a vital boost to Philadelphia residents that might not otherwise be able to buy a home in today's market. In addition to the obvious effects of giving grants to homebuyers in lower-income brackets, the education provided by Philly First Home ensures that first-time homebuyers get mortgages that they can afford long-term, reducing foreclosures. Meanwhile, Turn the Key will help generate millions of dollars of work for local developers, creating jobs for city residents while increasing the number of houses for sale on the market. Finally, the Turn the Key program aims to include a provision to give city workers a competitive advantage, ensuring that the city's dedicated public servants will be able to buy homes and put down roots in the area they serve. It's a solid step in the right direction that will help keep Philadelphia a competitive place to live, no matter what the global housing market does next.