In a period like the one we’re living in now where the fear of a recession looms over our heads, there is no better time to sell if you were considering it, as we’re more than likely nearing the tail-end of a seller’s market. Multiple offers are going into homes, and in order to get your pick of the litter as a homebuyer, you have to act quickly. This is also a moment in time where interest rates are lower than they have ever been historically, so we’re also seeing many homeowners refinance their homes. However, if you are a prospective homebuyer this is also the perfect time to lock in your rate before market conditions change any further. I wanted to give a breakdown of what you can expect if you are looking to purchase a home and are deciding whether to do so in Philadelphia County (which is made up of the same areas and zipcodes as Philadelphia City) or the neighboring Delaware County, PA
There are a number of popular areas around the outskirts of Delaware County that either border Philadelphia or is close enough to it that purchasing in Delaware County (or Del. Co. for short) can be practical for someone who works in Philly. These are the areas we’ll focus on. Particularly Upper Darby, Springfield, Sharon Hill, Collingdale, Darby and Eddystone. The inquiries I get most often are regarding Philly or the parts of Del. Co closer to Philly proper, so I’ve become very familiar with those areas. Buying a property in Del. Co. is less expensive than in Philly, which can be good news if you are interested in the pricey 2-4 unit multi-families currently listed in Philly, however there are pros and cons to be aware of. What is best for you will depend on what you prefer.
Philadelphia County: A Breakdown
The median price for a single family home in Philadelphia County at the moment is $223,350, and $234,500 for a multi-family property. Relative to a city like LA, where median home values are close to $700,000, or NY where prices are trending upwards of $650,000, Philadelphia is one of the most affordable major cities in the country. This value created by a lower cost of living continues to attract transplants into the city, however it doesn’t by any means make buying a home inexpensive.
One of the significant benefits to buying in Philly is the ability to take advantage of the city’s 10-year tax abatement, where as a property owner you don’t have to pay property taxes on any new construction or improvements for 10 years. For instance, you can find a new construction property in the Brewerytown area of North Philly for 350k, but end up only having to pay $500 in annual property taxes. On the flip side, closing costs might really turn you off given that the transfer tax percentage in the city is 4.278%, which is higher than in other areas, including Delaware County.
Delaware County: A Breakdown
The median price for a single family home in our subject areas of Delaware County (see above) at the moment is $180,000, and $147,500 for a multi-family property. These areas are even more affordable when it comes to housing prices than in Philadelphia. Moreover, the transfer tax percentage in Delaware County is a mere 1%. At a glance, purchasing in Delaware County is a very attractive option if you are okay with being slightly further out of Philadelphia proper.
On the other hand, taxes in Del. Co. are out the roof compared to Philly. For example, in Collingdale — an often sought out area in Del. Co. where property values are steadily increasing — you might find a home out there for $200,000, but the annual property taxes may be $6,000. Or in Upper Darby, maybe you’ll land a $120,00 Duplex that needs a little bit of work done to it, but then you’re paying over $4,000 in taxes. You get more bang for your buck when it comes to the cost of the home itself, but the taxes add a layer of frustration.
As detailed in the Philadelphia breakdown, you can pay just a few hundred dollars in property taxes for a renovated or brand new property as a result of the 10-year tax abatement, and this makes a serious difference to your monthly debt servicing. Usually when a person is referring to paying his or her mortgage, these monthly expenses also include taxes and insurance. So as you can imagine, paying $500 in taxes vs. $5000 would make a huge difference. But remember, the cost of the properties themselves are higher. What all of this tells you is that when comparing Philly and Del. Co., be sure to get a grasp on how much money you will have to pay up front, and how much your monthly debt servicing will be. If you are looking to apply for a mortgage, these numbers will be very helpful in determining which properties in which areas will be best for you.
Please comment below with your questions and thoughts. How do you feel about the comparison between buying a home in Philadelphia County vs. in Delaware County?