Real Estate boom in Philadelphia fueled by Millennials
Now that the dust is finally settling from the financial turmoil that has rocked the country for the last decade, Millennials are turning out to be a force in certain real estate markets that appeal uniquely to their demographic. Philadelphia is one of those markets, and the heat is on.
Whether or not they fit the ubiquitous profile that is most popular in media— that of the single, adult child in his or her 20s or 30s living at home, rent-free, with Mom and Dad—Millennials have been in a holding pattern, postponing household formation, home purchases and a large number of what most older generations consider to be integral facets of young-adult life. Their behavior has skewed a number of national trends, including a variety of real-estate-related ones, in the process.
LOOK BEYOND THE HYPE
A savvy investor will look past the media hype to realize it is irrelevant whether the Millennial population buys or rents—as long as that investor is appropriately positioned in the market. The questions are simple: Are Millennials moving into the market, and what induces them to spend their housing dollars— buying or renting—in the area?
Fortunately for investors, Millennials are extremely clear about what they want when it comes to housing, so it is easy to see that Philadelphia meets the criteria.
WHAT MILLENNIALS WANT
In a nutshell, Millennials are looking for good jobs, significant home appreciation in the next five years or fewer, and a specific lifestyle that offers city living, walkability and close proximity to work. Philadelphia is a prime spot for these things and, as a result, is quickly becoming a Millennial hotbed.
Philadelphia’s strong appreciation trend is likely to continue for the next five to 10 years, thereby fulfilling this generation’s desire for short-term geographic commitment. (Most Millennials say that they do not go into any job or location with more than a seven-year plan in place.) Metro-area real estate appreciated just over 7 percent in the last 12 months, and that rate is still rising. Philadelphia’s director of commerce, Alan Greenberger, recently went on record saying, “I have not seen a boom like this in the entire time I’ve been (in Philadelphia),” which is saying something since he’s been in the city since 1974—longer than Millennials have been alive.
Greenberger predicted that Philadelphia’s boom would last as long as another decade, although he warned that the pace of appreciation might slow as the boom levels off. Philadelphia’s boom is not likely to become a bubble because a steady influx of Millennials will keep the market moving and growing even as the intense pace of appreciation tapers off. Investors should be able to count on Philly’s solid inventory, population influx and growing market of first-time homebuyers, and single-family renters should sustain the growth without allowing things to get out of control.
Appreciation alone will not a Millennial market boom make, however. In order to attract Millennials, a market needs good jobs with growth potential with companies that are interested in working with a young population of workers. This describes the Philadelphia market precisely.
Philly is filled with companies building deliberately “cool” workplaces that are close to the townhouses and condos that most Millennials say they prefer, while the city itself is making the commute to work as pleasant as possible, thanks to everexpanding greenways for cycling and walking and an extremely solid transit system.
The biggest employers in the area are also still growing. Comcast, Lockheed Martin, GlaxoSmithKline and IBM all are expanding their operations in the area and have been since 2010, statistics show. These companies are courting Millennials and, in many cases, even have programs specifically geared toward helping their young employees pay off their student loan debts.
WHAT IS THE REALITY?
Are Millennials moving to Philadelphia and creating a strong, thriving, sustainable housing recovery in that city? You bet.
According to U.S. Census data, the median age of people moving to Philadelphia is just under 25 years. In a word: Millennials. Furthermore, they are moving into the area in huge volumes.
Last year nearly 60,000 people moved from the East and West Coasts to Philadelphia and, in large part, they moved there from higher-cost cities like Los Angeles, Baltimore, New York City and Washington, D.C. This not only indicates that the market is expanding, it also means that the new population is used to paying a pretty penny for housing and is likely to do so in their new locale.
For the price of a brand-new, luxury home in Philadelphia (think 9-foot ceilings, all the amenities, etc.), a buyer would be lucky to snag a fixer-upper two-bedroom, one-bath bungalow in D.C. or something even smaller and in a highly inconvenient location in Los Angeles. As a result, Philadelphia is nearly irresistible to Millennials wishing to “move up” in their housing or even start families in their own homes without ramping up their housing budgets.
Many analysts have counted the entire northeastern United States out of the Millennial-based housing recovery, due to high median home prices in that region of the country. Philadelphia’s housing market proves without a doubt that at least one northern city can absolutely benefit and thrive thanks, in large part, to Millennial movements in housing.
by Carole J. VanSickle Ellis