Philadelphia, also known as “Philly”, is the “City Of Brotherly Love”. The city was founded back in 1682, making it the oldest municipality in the country. It is the largest city in the whole of Pennsylvania. It is also the urban center of the eight largest metropolitan areas in America, and it is the cultural and economic core of the Delaware Valley. The economy of the city is the most diverse in the country. It includes important business sets such as financial services, health care, oil refining, food processing, trade, transportation, and biotechnology. Keep on reading to learn why the real estate market in Philadelphia is attracting rental property investors in 2022.
The housing prices and the competition have continuously risen since last year. Even though the market may cool down at some point, there are many potential opportunities for real estate investors in Philadelphia. The local estate experts suggested that now is the best time for buyers to buy real estate because the market is not as competitive as it was in the first part of 2021. If you want to invest in the Philadelphia housing market, analyzing the market trends is essential to understanding your potential profits. The current metro area population of Philadelphia in 2022 is 5,756,000, which is a 0.38% increase from 2021.
Philadelphia housing market analysis
The Philadelphia housing market is rising, a great sign for sellers and property investors. In Philadelphia, overall home values have increased by 9.9% from the previous year through December 2021. The home value index price rose to $228,000 since it broke the $200,000 record for the first time in the year 2020.
Market Hotness
Housing inventory
Philadelphia housing inventory has been experiencing a decline since 2017. According to the graph, the housing inventory has seen some small bursts of increase in the housing stock. Unfortunately, they were short-lived. From 2020 onwards, the inventory has only seen a rapid decline. On the other hand, Philadelphia does have an extremely hot seller’s market. So moving forward with a strategy will benefit you in the long run.
New private housing units authorized by building permits
This series represents the total number of building permits that you get for 1-unit structure types. Wondering what 1-unit is? The 1-unit structure type is a single-family house. A single-family house includes house types such as detached, semi-detached, townhouses, row houses. The units mentioned do not have access to shared heating or air conditioning. The attached units must be separated from another site unit by ground to roof wall; otherwise, it won’t be classified as a single-family structure. The new private housing authorized by building permits for Philadelphia was 1153.00000 units in December of 2021.
A historical trend of the Philadelphia housing market shows that private housing units have been on a relative decline, and the market crashed in 2009.
Value
The median value of owner-occupied housing units is $183,200.
- About two-thirds of the amount in the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metro area: $263,700
- A little less than the amount in Pennsylvania: $192,600.
Rental rates
The real estate market in Philadelphia looks too good to be true. Kiplinger personal finance ranks Philadelphia as one of the most affordable places in the US for buying a house and renters because the number of renters keeps growing.
The short-term rental sector in the Philadelphia housing market has also seen a growth in popularity. The addition of Airbnbs has changed the short-term market as a whole. With over 45 million visitors per year, Philadelphia has a high demand for Airbnb guests. The visitors include tourists and business travelers.
| Studio | 1bd | 2bd | 3bd | 4bd | |
| Median Rent | $970 | $1,121 | $1,358 | $1,689 | $1,935 |
| Fair Market Rent | $900 | $1,040 | $1,260 | $1,567 | $1,796 |
Short Term Rentals
The short-term rental market in Philadelphia is not as competitive during the winter months and reaches its peak revenue around summer. August has the most occupancy, making it crucial for homeowners and investors to have their units set up and rolling before the end of summer.
Huddled around the city center and downtown Philadelphia is a majority of 1 & 2 bedroom units. With this many units available with lower bedroom counts, arbitrage could definitely be an opportunity, especially considering the market rent for a 1 or 2 bedroom ranges from $1,121 – $1,358 which leaves some room for profit in the high season for potential revenues up to $2,411. It’s no surprise then that 86% percent come through Airbnb while booking their stay vs a minority using VRBO, although there is still a fraction listed on both.
Heatmap of rental income
Heatmap of Airbnb on cash return
Demographics
With a 2020 population of 1,585,480, it is the largest city in Pennsylvania and the seventh-largest city. The average household income in Philadelphia is $47,474, along with a poverty rate of 24.34%. In contrast, the median age in the city is 34 years old. The median rental costs in recent years round up to $1,042 per month, and the median House value adds up to $163,000.
Population
The median age is 34.7.
- About 90% of the figure in the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metro area: 38.9
- About 80 percent of the figure in Pennsylvania: 40.8
Geographical mobility
The geographical mobility has increased to 14.7% since last year.
- About 25 percent higher than the rate in the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD, Metro area: 11.8%
- About 20 percent higher than the rate in Pennsylvania: 12.5%
Migration map
Net flow
The net flow was seen to be the highest in Philadelphia in 2020.
Education
85.9% High school grad or higher
- A little less than the rate in the Philadelphia-Camden-Wilmington, Metro area: 91.2%
- A little less than the rate in Pennsylvania: 91%
31% bachelor’s degree or higher
- About 80 percent of the rate in Philadelphia-Camden-Wilmington, Metro area: 39%
- A little less than the rate in Pennsylvania: 32.3%
Per capita personal income
47,474 median household income
- About two-thirds of the amount in Philadelphia-Camden-Wilmington, PA-NJ-DE-MD, Metro area: $74,533
- About three-quarters of the amount in Pennsylvania: $63,463
Income
$29,766 per capita income
- About three-quarters of the amount in the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD, Metro area: $40,930
- About 80 percent of the amount in Pennsylvania: $35,804
Poverty
There is a 32 percent poverty rate in children under the age of 18 in Philadelphia, while the poverty rate in seniors at the age of 65 is 19 percent.
Unemployment rate
The unemployment rate is 5.30%. The highest unemployment rate was in 2020, which shot up to 15%.
Job postings on Indeed
Indeed calculates the percentage change in seasonally-adjusted job postings since February 1, 2020, using a 7-day trailing average. The company has its series based on historical patterns in 2017,2018, and 2019. Each series, including the national trend, sub-national geographies, and occupational sectors, are seasonally adjusted separately. However, Indeed decided to switch to a new methodology in January 2021. The company now reports its historical data using this new methodology. The new methodology comes with a detrended seasonal adjustment factor to the percentage change in job postings. Additionally, the historical numbers have also been changed and may differ from the old original reported values.
Sustainability
According to the American lung association’s 2020 report, Philadelphia-Reading-Camden, MD metro area, is ranked as the 12th most polluted city in the nation for its all-year-round average levels of fine particle pollution. And is the 23rd most polluted for days with high levels of smog. However, Pennsylvania ranks 14th most eco-friendly state in the US. It is ranked 17th in environmental quality, number 24 in eco-friendly behavior, and number 32 in climate change contributions. Taking care of the environment around you is important. At Dynamic.RE we believe in keeping yourself and your surroundings clean and safe.
Electricity costs
Philadelphia area households paid an average of 17.2-kilowatt-hour (kWh) of electricity in January of 2022. It is 11.7 percent higher than the average 15.4 cents in January of 2021.
Gasoline prices
The average gasoline price is $3.529 per gallon. The price of gasoline in the Philadelphia area was close to a national average of $3.500 in January 2022.
Transportation to work
It takes a mean time of 34.3 minutes to travel time to work
- About 10 percent higher than the figure in the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metro area: 30.8
- About 25 percent higher than the figure in Pennsylvania: 27.8
Rebates and incentives
The conversation of having Sustainability is important. The benefits of sustainability, for example, tree canopies, well-maintained parks, and access to fresh food and water are inequitably distributed by race and class. The north, west, and southwest of Philadelphia have an increase of poorer neighborhoods, where there is a lack of trees and green infrastructures. Which ultimately means they are hotter on average compared to wealthier neighborhoods. The PGW is a collection of programs, Rebates, conversion incentives that are designed to help save money now and in the future too. You can receive your money back on energy-efficient equipment while helping the city of Philadelphia become and remain the greenest city in the world. Another program, PECO, offers homeowners to convert to natural gas to reduce their electric consumption. Or homeowners can also upgrade to more energy-efficient heating and cooling equipment.
Conclusion
Philadelphia is a hot sellers real estate market by all housing indicators. The huge supply and demand gap leads to rapid price appreciation. The prices of homes in Philadelphia rose to almost 13% in 2020. The city of Philadelphia is usually classified as a historic city. But the city is actually on the rebound, and the Philadelphia real estate market shows an excellent opportunity for investors in 2022. If you are a home buyer, purchasing a home in the current market is ideal. All you have to do is come with an open mind and patience. At Dynamic RE, all residential redevelopers, short-term rental operators, and buy-and-hold investors are welcome. Whether you are looking for some help with managing short-term rentals or you are wondering how to get involved, we at Dynamic RE are right here to help you through every step of the way.
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