The Philly region is likely to be one of hottest housing markets in the country this year. Here’s why.

Coming from self-described humble beginnings, Sanziana Penafiel, 24, and Mark Washington, 26, were proud when they saved up enough money living with family to afford to buy their first home in South Jersey last year.

“We definitely heard from a lot of people discouraging messages of ‘the market is very tough right now. It’s gonna be a brutal process. You’re gonna overpay,’” Penafiel said. “We just kind of jumped into it.”

Over the next month and a half this fall, they saw there was truth to the warnings. “Just the competitiveness,” said Penafiel, a mental health therapist for adolescents at Penn Medicine. “It was incredibly overwhelming.”

Decently priced houses in good condition and in good neighborhoods went fast. The couple toured a house in Florence Township, and “as soon as we decided, ‘Let’s go for it,’ it was already off the market,” Penafiel said. “That was a kick in the butt.”

They started checking home listing websites “every hour of every day.” They toured many homes, including fixer-uppers that needed a lot of work. But even they were expensive.

Their real estate agent “helped us stay the course,” Washington said. They eventually found a three-bedroom, 2½-bathroom townhouse in Florence Township where they could see themselves hosting Eagles watch parties and expanding their family. They paid $375,000, a few thousand dollars above the listing price.

The Philadelphia metropolitan area ranks fifth on Zillow’s list of the hottest markets for 2025. The affordability of its homes compared to other nearby markets and the shortage of homes for sale compared to demand have made the region one of the country’s most competitive markets.

» READ MORE: What the 2025 housing market might look like, according to Bright MLS

Zillow ranked the country’s 50 most-populous metropolitan areas based on its predictions of local home value growth, how quickly homes sell, expected growth in homeowner households, and the number of jobs created compared to the number of new homes permitted.

“Philly happens to be one of those markets where buyers are kind of starved for housing inventory,” said Orphe Divounguy, a senior economist at Zillow. ”The gap between supply and demand has closed a little bit, but just not as fast as in markets across the country. … You’re seeing other markets improving in terms of inventory much faster.”

The Philadelphia metro is not a market that tends to build a lot of housing, he said, which explains why it jumped up six spots on Zillow’s list of competitive markets compared to last year.

» READ MORE: Housing supply is up in the Philly region, but not enough to meet demand

“Competition among buyers remains stiff compared to markets that build more,” he said.

In the Philadelphia area, the supply of homes for sale in December was up 5.5% compared to the same time the year before. In the country as a whole, housing inventory was up 16.8%.

As of December, the region’s supply of homes for sale was 46% below where it was before the pandemic. That’s a much more dramatic drop than the 25% decrease in inventory nationwide.

On top of low housing supply, the Philadelphia region remains attractive for homebuyers, including those looking for more affordable homes compared to other major markets. Meanwhile, the region is adding jobs faster than it is issuing permits for new homes. That all bolsters housing demand.

Because of that strong demand, homebuyers in the Philadelphia metro area have less time to make decisions than buyers in many other major metros, such as ones in the South that build more housing, Divounguy said. The typical home in the Philadelphia metro goes from just-listed to an offer in 21 days, according to Zillow’s analysis. That’s compared to 37 days nationwide.

Erica Deuschle, a real estate agent based in Ardmore who works on the Main Line, said that in 2024, homes stayed on the market for an average of one week for her and her team, the Erica Deuschle & Co. Real Estate Team. Homes that were “priced right and presented well” could go in a day, she said.

Deuschle, who also is managing partner of Keller Williams Main Line at Suburban Square, said she’s not surprised that Zillow named the Philadelphia region one of the country’s hottest markets. “We have great schools. We have great culture,” she said. Then there are the universities and hospitals. And Philadelphia is a great city, she said.

The area has had low housing supply “for years and years,” Deuschle said. “And we will have an inventory problem for the very foreseeable future.”

Elevated mortgage interest rates also are still helping to keep home supply low. The average rate for the popular 30-year, fixed-rate mortgage climbed above 7% in mid-January, according to the government-backed mortgage buyer Freddie Mac.

Jacob Channel, senior economist at the online loan marketplace LendingTree, expects rates to stay “relatively steep and erratic” in 2025.

Homeowners who got low rates in recent years don’t want to give them up in exchange for higher rates when they buy another home. “Unless they have a life change that’s more important than the interest rate,” Deuschle said.

December isn’t a popular time for homeowners to put their properties on the market. But Blase Pronsati’s oldest son got a job in Minnesota, and his husband, Scott Wrasman, had recently left his.

“I looked at Scott and said, ‘What do you think about moving closer to the grandkids?’” said Pronsati, 63. “And he said, ‘I’m in.’”

Pronsati is an appraiser and knows all about comparable sales and the region’s low housing supply. In the four years his family lived in their East Norriton Township neighborhood, homes listed for sale there usually sold within a week.

Even so, he said he still felt “a little trepidation” when he listed their four-bedroom, 2½-bathroom home for sale on Wednesday, Dec. 18. But by that Friday night, they had an offer. They went under contract for $585,000, which was $20,000 more than the listing price.

“I’m happy,” Pronsati said.

Because the region’s supply of homes for sale is too low to meet demand, local sellers have the upper hand and will keep it for a while.

For homebuyers, “it’s not a fun market to navigate,” Deuschle said.

Tony Lee, broker/owner of Home Journey Realty, who works in South Jersey and Bucks County, said potential homebuyers have told him they want to keep renting until the housing market stabilizes and home prices and interest rates come down. But he tells buyers not to wait. He doesn’t see those things happening anytime soon, not when homes are still receiving several offers.

But he expects more home sales in the region in 2025 and “steady and slow growth” in the market.

He said he has seen some improvement in the supply of homes for sale and some areas where price growth is leveling off. As a result, there’s been an increase in first-time homebuyers entering the market.

Penafiel and Washington, who were Lee’s clients, were motivated to become homeowners. They skipped the tenant stage all together.

“As a young Black man, I was always taught to own,” said Washington, who works for JPMorgan Chase & Co. “So I wasn’t looking to rent.”

The couple’s new home in “a really nice neighborhood” is close to their jobs and families, and Route 130 and seems like a good investment, Penafiel said. More townhouses and apartment complexes are going up around them. “The area we feel like is up-and-coming,” she said.

They moved into their home the same mid-October day they closed on the sale, getting “the best sleep” on a mattress on the living room floor, Washington said. Now, they’re settled and planning some future renovations.

“We’re definitely excited and happy we made this decision,” he said.