{"id":157537,"date":"2023-08-31T14:09:37","date_gmt":"2023-08-31T20:09:37","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=157537"},"modified":"2023-09-01T14:11:29","modified_gmt":"2023-09-01T20:11:29","slug":"philadelphia-real-estate-market","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/philadelphia-real-estate-market","title":{"rendered":"Investing in the Philadelphia Real Estate Market\u2014Prices & Trends in 2023"},"content":{"rendered":"\n

Philadelphia, also known as the \u201cCity of Brotherly Love,\u201d is home to about 1.6 million people, making it the 6th largest city in the United States. It features a decently-sized job market, some of the top colleges and universities in the country, a very devoted sports crowd, and a unique blend of old and new America. It also happens to have one of the most affordable real estate markets amongst large cities in the country, but it\u2019s not all rosy.<\/span><\/p>\n\n\n\n

In this article, we\u2019ll cover the important information you need to know about Philadelphia and investing there.<\/span><\/p>\n\n\n\n

Population and Labor Market<\/span><\/h2>\n\n\n\n

We\u2019ll start with some of the bad news in Philly. The resident population has been on the decline since 2020. While it\u2019s not the worst decline (only 30,000 fewer people), buying real estate in a place where people are leaving more often than entering is never the best sign.<\/span><\/p>\n\n\n\n

\"Population
Population of Philadelphia (2000-2022) – St. Louis Federal Reserve<\/a><\/em><\/figcaption><\/figure>\n\n\n\n

The reasons for the decline vary. A 2019 survey from\u00a0<\/span>Pew Research<\/span><\/a>\u00a0found that most residents were leaving due to employment. While Philadelphia has a decent job market with a strong presence in healthcare, telecoms, and education, it\u2019s also smack in the middle of New York City and Washington, D.C.<\/a> A lot of the freshly educated minds coming out of the city\u2019s various top colleges, including the University of Pennsylvania, wind up getting recruited to those markets. Of course, this survey was taken before the pandemic, so it\u2019s also safe to assume that many left the city due to the familiar reasons we saw in other cities: a sharp increase in crime, economic and social upheaval, and a desire to stay out of crowded areas.<\/span><\/p>\n\n\n\n

But it\u2019s also important to note that Philadelphia\u2019s unemployment rate has always trended above the national average and was especially harsh during the pandemic years. So overall, Philadelphia\u2019s crutch is its lack of opportunity.<\/span><\/p>\n\n\n\n

\"Unemployment
Unemployment Rate in Philadelphia Compared to National Rate – St. Louis Federal Reserve<\/em><\/figcaption><\/figure>\n\n\n\n

While Philly\u2019s declining population isn\u2019t a deal breaker, it\u2019s something to pay attention to.<\/span><\/p>\n\n\n\n

Philadelphia Home Prices and Inventory<\/span><\/h2>\n\n\n\n

The redeeming factor of Philadelphia is its home prices. It has consistently remained more affordable than many of the country\u2019s largest cities. While it experienced rapid appreciation during the pandemic, like everywhere else, its prices are still extremely affordable. In fact, home prices are roughly $200k less than the national average! For outsiders, this makes Philly extremely attractive. For insiders, it\u2019s indicative of the city\u2019s economic struggles and stagnant population.<\/span><\/p>\n\n\n\n

\"Population
Median Sales Price in Philadelphia (2019-2023) – Redfin<\/a><\/em><\/figcaption><\/figure>\n\n\n\n

But, of course, from the investor\u2019s perspective, Philadelphia offers plenty of opportunities\u2014so long as you can fill the unit.<\/span><\/p>\n\n\n\n

\"Months
Months of Supply in Philadelphia (2013-2023) – Redfin<\/em><\/figcaption><\/figure>\n\n\n\n

The chart above shows supply. This doesn’t look any different from most other markets. We’re in a low-supply environment all the way around.<\/p>\n\n\n\n

Philadelphia Rent Prices<\/span><\/h2>\n\n\n\n

Since 2020, rent prices have appreciated steadily, from a median price of $1,568 to now $1,760. It\u2019s not the same story as some other markets that have skyrocketing rents, and that\u2019s largely due to the available supply and declining population. <\/span><\/p>\n\n\n\n

\"Median
Median Rent Price in Philadelphia (2019-2023) – Redfin<\/em><\/figcaption><\/figure>\n\n\n\n

I\u2019ll note that if you <\/span>can <\/span><\/em>fill a unit with a tenant, it\u2019s much easier to cash flow here than in other cities, but I will add the caveat of increasing mortgage rates and the significant pressure it\u2019s putting on cash flow.<\/span><\/p>\n\n\n\n

Cash Flow Prospects in Philadelphia<\/span><\/h2>\n\n\n\n

Speaking of cash flow, Philadelphia made our top 10 list for the <\/span>best cash flow markets<\/span><\/a> earlier this year. The reason, you may have guessed, is affordable homes and relatively high rents. <\/span><\/p>\n\n\n\n

\"Rent-to-Price
Rent-to-Price Ratio in Philadelphia<\/figcaption><\/figure>\n\n\n\n

In the map above, you’ll see the <\/span>rent-to-price (RTP) ratio<\/span><\/a> of each ZIP code, which is an indication of cash flow viability. Generally, you want to find an RTP ratio close to 1% when looking for cash flow.In Philly, most of the best cash flow options are north and west of Center City. The top ZIP codes in Philadelphia for RTP are:<\/span><\/p>\n\n\n\n

    \n
  1. 19133 – Fairhill (2.46%)<\/span><\/li>\n\n\n\n
  2. 19132 – Allegheny West (1.85%)<\/span><\/li>\n\n\n\n
  3. 19142 – Elmwood (1.41%) <\/span><\/li>\n<\/ol>\n\n\n\n

    Just keep in mind that with higher interest rates, you might find it hard to cash flow, even in a market that\u2019s been favorable for it in the recent past.<\/span><\/p>\n\n\n\n

    Winning Strategies<\/span><\/h2>\n\n\n\n

    Brandon Ribeiro, an investor-friendly real estate agent in the Philadelphia area, tells us that “most properties right now simply don’t work for cash flow considering the interest rates, so investors will walk away from them. However, you can leverage less money out-of-pocket by house hacking. Then, in a year or so, move out and refinance when rates decrease. This can give you a nice start to your portfolio.”<\/span><\/p>\n\n\n\n

    If you\u2019re interested in learning more about investing in Philadelphia, partner with a local investor-friendly real estate agent like Brandon Ribeiro, who can guide you through which strategies, tactics, and neighborhoods to focus on.<\/span><\/p>\n\n\n\n

    Here\u2019s how to <\/span>contact Ribeiro on Agent Finder<\/span><\/a>:<\/span><\/p>\n\n\n\n