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hiladelphia's real estate market is expected to perform well in 2025, according to Zillow's annual forecast. Local analyst Kevin Gillen says this is due in part to its proximity to New York City, which has driven up demand for Philly homes. While the area's market is cooling down, Gillen notes that it's returning to a more balanced state.

    Higher interest rates and low inventory are contributing to this trend. The "lock-in effect" means homeowners are hesitant to sell their current properties due to potential smaller houses and higher mortgage payments. Additionally, the post-COVID economic run-up kept many first-time buyers on the sidelines.

    However, middle- and upper-income New Yorkers see Philadelphia as a bargain, particularly in Center City and Bucks County. These areas offer upscale homes at lower prices compared to Manhattan. Gillen notes that it's not just individuals relocating from NYC, but also capital flowing into the area for rental properties.

    The influx of this capital is driving up demand and making the market hot. Gillen describes these New Yorkers as successful professionals who can't afford high-end homes in Greenwich, Connecticut, but can afford them in Bucks County or Center City Philadelphia. The region's affordability makes it an attractive option for those looking to relocate from NYC.

    Despite its large size, Philadelphia is considered a secondary market to New York. However, this status isn't necessarily a bad thing. Gillen believes that the cooling of the local market will improve affordability and allow incomes to catch up with prices. This could lead to more first-time buyers entering the market, further driving demand and making the area hot once again.