Note: Our market forecast includes Philadelphia data and data from its surroundings, including Camden, New Jersey, and Wilmington, Delaware.
As the sixth-most populated city in America, Philadelphia is, no doubt, a market worth investors’ consideration. More than 1.5 million residents call the city home, and when you lump in residents from surrounding cities like Camden, New Jersey, and Wilmington, Delaware, you have a market reaching a whopping 6 million people metro-wide.
Its economy is strong, too. The region has deep ties to the education, healthcare, and food industries, and its many historical sites and landmarks (hello, Liberty Bell and Independence Hall!) deliver a steady stream of tourist activity as well.
The city is also home to dozens of colleges, universities, and institutes of higher education -- including renowned ones like the University of Pennsylvania, Temple, Bryn Mawr, and Villanova.
Are you considering investing in Philadelphia real estate? Here’s what you need to know.
The state of the market
Philadelphia’s real estate market is largely on the up and up after its pandemic-fueled troughs, but there are still challenges to overcome. Unemployment is rising, supply is low, and home prices have surged significantly over the past year.
Though there’s reason for optimism, the next few months of recovery will be critical. Current Housing Tides data has many of the city’s key market indicators on the “Weakening” side.
Here are the three major trends we’re seeing in Philadelphia right now:
- Multifamily is hitting its stride.
- Supply is improving.
- Prices are rising.
1. Multifamily is hitting its stride
Multifamily permits have been on a tear lately, not only outpacing forecasts but clocking in their highest numbers since at least 2016. Though that may send up red flags that a glut of inventory is on its way, rental vacancies seem to show solid demand.
Not only are vacancies down over the year, but they’re also well below averages seen in many of the last five years. Throw in the area’s rising number of households, and it likely spells good news for investors in this sector.
2. Supply is improving
This isn’t something that can be said for most markets these days. While Philly’s overall housing supply is still low, it’s a big step up from national averages. Architectural billings and single-family permits have also improved in the area, and builder sentiment is strong -- all of which bodes well for the market. The only thing holding supply back is increasing construction costs, which are posing problems for builders nationwide.
3. Prices are rising
As is the case with most parts of the country, both median home prices and rents are on the rise in Philadelphia. Home prices are up nearly 14% over the last year, and rents have jumped 2.5%.
One thing to note? Both numbers come in well below national averages. Additionally, increases have started to level out in recent months, possibly indicating a slight cooldown in the market.
Philadelphia housing demand indicators
Charts courtesy of Housing Tides, an EnergyLogic company.
Demand in Philadelphia is largely on the weakening side. Unemployment is up, consumer sentiment is down, and rising home and rent prices are posing challenges. The one silver lining is that Philly’s population is growing. The city has gained over 37,000 new households in just the last year.
Philadelphia’s unemployment rate was one of the worst in the country when the pandemic first hit, topping out at over 14%. While employment recovered in the back half of 2020, that rate has started to rise once again. It currently sits at 7.7% -- up 3.1% from January of last year and more than a full percentage point higher than the national average. The metro area has lost about 229,000 jobs total in the last year.