BETHLEHEM, Pa. — Mortgage rates increased just before the new year and aren't expected to make any significant drops before 2026.
And a study has found that in the Lehigh Valley, it's now cheaper to rent a home than to buy one.
That could mean even more pressure on an already tight market, professionals say.
"It's a hot market."Lehigh Valley Realtor Joe Clark
"The typical monthly mortgage payment of a median-priced home [$412,778, per Redfin] in the U.S. is $2,703, while the national typical monthly rent is $1,979 as of February — a 36.6 percent difference," according to a study by Bankrate.
Bankrate, which describes itself as a "comparison service," said that since April, the Lehigh Valley has kept in line with a trend across the Top 50 metropolitan areas.
The Greater Lehigh Valley Realtors' monthly report from November showed average home sale prices are up 14.2% from last year at $411,394.
With current interest rates — which are above 6% — and a 10% down payment, Zillow estimates monthly mortgage payments would cost $2,430 for a home of that average price.
That number bumps up to $3,059 with approximate taxes and insurance included.
Fannie Mae doesn't predict average rates for a 30-year fixed rate mortgage to dip below 6% through 2026, according to its November 2024 housing forecast.
Sources from the forecast include the Census Bureau, National Association of Realtors and Freddie Mac.
Alternatively, Zillow's rental market summary shows that local markets have shown an increase since last year, but monthly rental prices still are lower than current mortgage payments.
Mortgages rising
The Greater Lehigh Valley Realtors report also depicts year-to-date average home sales prices throughout Lehigh and Northampton counties' school districts.
They include:
- Allentown: $257,812
- Catasauqua: $354,298
- East Penn: $430,309
- Northern Lehigh: $273,617
- Northwestern Lehigh: $497,914
- Parkland: $478,902
- Salisbury: $431,875
- Southern Lehigh: $610,798
- Whitehall: $314,672
- Bangor Area: $323,513
- Bethlehem Area: $352,002
- Easton Area: $392,986
- Nazareth Area: $510,759
- Pen Argyl Area: $307,789
- Saucon Valley: $582,160
- Wilson Area: $353,797
The year-to-date average for those prices is $386,443, which the Zillow mortgage calculator estimates would break down to a monthly payment of $2,282 without taxes and insurance.
Median rent in local markets are significantly lower, according to ZillowRentals.
Rents remain affordable
Could that mean renting will be on the rise?
Those working in the industry say the Lehigh Valley's location lends itself to a mix of buyers and renters.
The real estate marketplace shows top rental markets in the country include Phoenix, Arizona; Los Angeles; Dallas; Orlando, Florida; Miami, Florida; San Diego, California; Chicago; Houston, Texas; New York, New York; and Atlanta, Georgia.
The highest of those is in New York, landing at a median rent of $3,369, with Miami following at $3,020 and San Diego at $3,000.
In the Lehigh Valley, median rent ranges from $1,550 in Allentown to $1,885 in Bethlehem. Allentown and Easton have median rent prices at least 20% lower than the national median.
Bethlehem is just 6% lower than the national median.
Reports from the Florida Atlantic University College of Business — both about national and local rental markets and housing markets — depict the Top 100 U.S. Housing Markets and what local rents are, what they should be, and how they compare to the national average.
Allentown landed at No. 57, which shouldn't come as much of a surprise since Zillow just named the city one of the Top 10 most popular markets.
The university's report also is from May 2024, but estimates the average home price, as of May 31, 2024, at $331,521, but states the expected price should be $271,195.70.
The Waller, Weeks and Johnson Rental Index, which measures average rent, statistically predicted rent and price changes, also most recently (based on May 2024 data), reports Allentown's average rent at $1,780.66.
That's slightly up from its $1,739.98 "Where Average Rent Should Be" price.
Those rates still are cheaper than the index's reported average national rent of $2,036.15.
And while the Lehigh Valley's rental market isn't as hot as Miami's, it's still up there in comparison with the rest of the country.
RentCafe's 2024 Year-End Report found that, "In Lehigh Valley, PA — the hottest small market for apartment hunters in 2024 — more than 80% of renters stayed put, faced with extremely limited options to choose from."
The report said the Northeast region of the country "emerged as a tough region for renting" — eight major metros ranked in RentCafe's top 30 rental markets for 2024.
'A hot market'
Joe Clark, a landlord with more than 500 units in the Lehigh Valley, and Tim Tepes, a Realtor with Better Homes and Gardens Real Estate, say they aren't surprised.
In small rental markets, the Lehigh Valley took the top spot, and not just in the Northeast.
"Lehigh Valley, PA, emerged as the nation’s hottest small rental market in 2024 with an RCI score of 90.1," the report says.
The area's competitive score went up from 83.6 in 2023 to 90.1 in 2024, with 96.2% of apartments occupied and 80.7% of leases renewed.
"I have some very, very long-term tenants."Lehigh Valley Realtor Joe Clark
But new apartment construction decreased from 2.78% to 0.14% in 2024.
Clark, having been in business for the past 57 years, agreed.
"It's a hot market," he said, and said that if it hadn't always been this good, he wouldn't be in business this long.
"I have some very, very long-term tenants," Clark said. He said he's rented to generations of families, with units going from grandparents to children to grandchildren.
Tepes, too.
Better Homes and Gardens Real Estate says Tepes is affiliated with T. Tepes Property Management & Rentals, Tepes Construction Co. Inc (since 1950), Treco LLC (Tepes Real Estate Company LLC), and Total Close Settlement Company. Like Clark, Tepes said he's rented out properties to families for more than 20 years.
"Besides locals and remote workers, the area's high demand is also fueled by students from local colleges and universities," the report says.
"As a result, prospective renters face tough competition with less than 4% of units available.
"What's more, apartments in Lehigh Valley stay on the market for 39 days, on average, with 15 renters competing for each unit."
Likely to level off, not fall
Competition is so fierce that Tepes said he's never seen anything like it.
"My family's been in business since 1950, so between the rental business to new construction business, and then I started the resale business in 1990," Tepes said.
"So, you know, I grew up in business, and I've seen the roller coasters up and down over the years.
"So I see that roller coaster of time, and right now, you know, we're still trucking up the roller coaster, going up the hill. I don't think the Valley is going to suffer a big crash for a number of reasons."Realtor Tim Tepes
"But this housing market and this rental market is something we've never really experienced or saw before — and we've been saying this ever since COVID."
With rates projected to stay around 6%, Tepes said he thinks the market will remain "steady" between residents looking to live in the area for a cheaper rate through renting and those ready to buy.
Tepes said that when he got into the business, mortgage rates were 10-12%.
"So I see that roller coaster of time, and right now, you know, we're still trucking up the roller coaster, going up the hill," he said.
"I don't think the Valley is going to suffer a big crash for a number of reasons.
"I think the market's going to stay strong and steady and then flatten off. But we never had a crash where prices decreased or rents went down. They level off and then go up."
'A lot to be proud of'
Why? Tepes and Jack Gross — both former Greater Lehigh Valley Realtor board presidents — attribute it to location.
"We're geographically blessed," Gross said.
Gross said he's watched the area shift from being recognized as the Lehigh Valley, then the Allentown-Bethlehem-Easton Metropolitan Area and he now believes some might consider it a suburb of New York.
"We also have some vision in the Valley where they're trying to improve the downtown district in Allentown, Easton and Bethlehem, and making improvements. So we have a lot going on, a lot to be proud of, and that just keeps driving up rent and housing pricing."Realtor Tim Tepes
With the Valley less than a two-hour drive from New York City, Gross said a big factor attracting prospective residents to the area is the idea of earning "a Manhattan income at only a Valley cost of living."
"Here's the thing: We're Walmart," Gross said. "So Manhattan, northern New Jersey, they're Macy's, they're Nordstrom, they're whatever.
"As long as we're Walmart to the market... I just don't see it changing anytime soon."
Gross, who is president of Cassidon Property Management and also a Realtor with Better Homes and Gardens Real Estate, said he thinks the fluctuating interest in the market will keep it steady.
For someone who might want to live in the Lehigh Valley for one to two years, Gross said he would recommend renting.
But for those who want to build generational wealth, gain appreciation, tax benefits and have a liquid asset, he strongly advises buying a home.
Like Tepes, Gross said he hasn't seen interest in the Lehigh Valley like this, but Gross said the "boom" after Interstate 78 was completed was comparable.
"We have the jobs, we have the location," Tepes said. "That's why we never had really a drop in our market.
"You have a lot of great companies — they're still in the Valley. So we have the jobs.
"We also have some vision in the Valley where they're trying to improve the downtown district in Allentown, Easton and Bethlehem, and making improvements.
"So we have a lot going on, a lot to be proud of, and that just keeps driving up rent and housing pricing."
