The Philadelphia residential real-estate market is still running hot at a time when there are some concerns over slowing property price inflation and even falling prices, in other cities and districts. However, there are a number of elements to the Philly backdrop that remain supportive of higher prices, both right now and even if the broader US economy hits some trouble in the next couple of years.
High up on the list of supportive residential real estate details, is the region’s eds and meds infrastructure. That’s closely followed by the fact that until recently, Philadelphia was one of the lowest priced ‘big’ cities. Add to that its location on the east coast between New York and Washington DC.
Taken together, you’ve got a good list of reasons why Philadelphia property prices are well placed to withstand any economic slowdown, even if the local market could be described as a little ‘frothy’.
Eds and Meds
Philadelphia was once a major manufacturing and industrial hub. However, that’s no longer the case and its now the eds and meds sectors that are a major driver of the local economy. The eds and meds title comes from the city’s large number of hospitals and major research university facilities.
The two industries often expand hand-in-hand and this has proved a real boom for Philadelphia, particularly in recent years. First of all, the eds and meds sector has helped ensure Philly’s unemployment rate remains under control. The most recent data from the Bureau of Labor statistics shows the unemployment rate across the state was 5% in November, down from 5.2% in October and the joint lowest rate since 2000.
That improvement in Philadelphia’s unemployment rate was also at a much faster pace than the 0.2 percentage point improvement experienced across the US economy, as a whole.
In addition to that, just a few months ago the city launched the Philadelphia Anchors for Growth & Equity, or PAGE, to encourage the area’s largest employers – mainly eds and meds – to exercise their hefty purchasing power, more locally. While it’s a new initiative to Philly, it’s one that has borne fruit for other cities and regions and will help provide further growth for the local economy over the next 5-10 years.
PAGE will continue to support employment and investment in the city, even if the broader US economy does begin to struggle following a long period of strong growth, post the 2008 downturn.
Real-estate affordability
While the eds and meds industries are a major part of Philadelphia’s recent economic, employment and real-estate market successes, it’s just one of the many positive driving forces.
Another reason why the city’s property prices have been able to rise and should continue to do so, is because they started at a low base. As one of the US’ larger cities, Philly was still home to some of the lowest priced residential properties for a growing and well-educated workforce. As investment into the region has increased at a time of low interest rates, demand for property has risen, sending the average price across the city, higher.
Research done by Zillow shows that while the prospect of higher US interest rates could hamper affordability and buying power in many of the country’s more expensive cities and states, however -for Philadelphia, that would not be the case. Indeed, some 76% of residential real-estate listed for sale will still be affordable, even if 30-year mortgage interest rates hit 6%, down from around 81.8% at current mortgage rates.
East coast location
Also supportive of the city’s housing market is its location on the east coast, between New York and Washington DC. Making it a perfect location for individuals that are willing to travel to either one of the east coast biggest job markets. Commuters, in return, will definitively get bigger bang for the buck – anyone who spent more than 2 minutes of research, will know it to be true.
Meantime, it’s also well served by fast internet speeds, which makes it a good location for telecommuters and remote workers.
Those two details mean that outside of the bustling eds and meds economy within the city, it’s also an attractive and still affordable location for a variety of other reasons.
But there’s still more! Philadelphia’s location on the I-78/I-81 corridor – described as the “Inland Empire of the East” is a big draw for warehouses and delivery hubs. It isn’t as big for Philly as the manufacturing industry was pre-1950’s, however, it adds to a long list of reasons for homebuyers to consider Philadelphia as the perfect place to invest and buy a home of their own.
Is Philadelphia really recession proof?
With all those bullet points coming together to support a buoyant employment market, the Philadelphia economy is in great shape to weather a broader US downturn. Not least because the medical and education sectors form a considerable proportion of the region’s employers.
The city planners are continuously considering how to support the local economy, as this latest PAGE initiative attests. And although there is some uncertainty of just how long the abatement tax is set to remain as it is, right now there are now immediate plans for it to change which will also continue to encourage investment into the Philadelphia real-estate market.
That’s something that supports jobs and ensures there are plenty of attractive homes for any incoming workforce to consider. It also means that consumers working nearby but living in more expensive areas, could be encouraged to move to the more affordable and still improving city of Philadelphia.
Of course, recession proof is a strong label to put on anything. But there’s certainly a very robust case to attach it to the Philadelphia residential real-estate market.
Sources:
US unemployment figures
https://www.bls.gov/eag/eag.pa_philadelphia_co.htm
https://fred.stlouisfed.org/series/PAPHIL5URN
Zillow research
https://www.zillow.com/research/rising-rates-home-buyers-22531/
https://www.zillow.com/research/best-metros-for-remote-workers-22621/