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Philadelphia Real Estate Update

Nation-wide

  • Generation X (Millenniums)
    • Currently the largest group in the labor force (Source: Pew Research Center)
    • Consume less amount of calories than prior generation (Source: Goldman Sachs)
    • Search for experiences instead of owning (Source: Forbes)
    • Labor productivity growth is well below post-war average
  • General Housing Market
    • Slow-down in the construction of the multi-family
  • General Economics
    • The lowest growth in productivity since mid-1980’s
    • Household Net Worth is (just about) at the highest point in 25 years
    • Single-Home building is far below the 90’s average while multi-unit is above
    • Expectation of higher inventories
    • Labor participation rate is at the lowest rate since 1976

Source: Federal Reserve Bank of Richmond, otherwise noted

Theories and Prior Studies

  • Markets don’t fall from the peaks but during near-peaks
  • Studies show that most of the income growth happens before age 30’s
  • The Great Recession dampened the starting wage and wage growth of the recent college graduates
  • Current generation will have multiple jobs often requiring geographic change

 

I look at the share economy as another indication that most of the new labor is unable to live at the level of the prior generations. Optimizing or efficient use of resources is only necessary if there is a pressure on income. In the 1950’s and 60’s, US consumers continued to grow their houses’ number of car garages because of the astonishing wealth production. Today, China is looking to find efficient use for their manufacturing because of greater competition and lower demand from the globe.

One of the key drivers of Philadelphia is the wealth transfer that is happening on unprecedented scale. Pennsylvania has been the largest receiver of students while New Jersey the largest exporter. With the largest number of hospitals of any city, Philadelphia is winning at the healthcare share of the market. However, most of the hospitals operate on a very small profit margin (around 2-5%). Therefore, the high specialization wings of various hospitals are being constructed. Moreover, the wealth transfer is happening as the older generation is moving into the city to take advantage of the support resources available for senior citizens. Philadelphia has one of the largest percent of the population who are retired of major cities in the US. The Philadelphia’s Market street transportation hub is one of the best next works in the United States. That is why one of the casino applications was for 8th and Market Street. The wealth is being transferred from the suburbs. Washington and Miami are likely to overtake Philadelphia metro area in population (Source: New Geography). Although New York exported 26,957 individuals to Philadelphia (Source: Washington Post).

Source: Pew Research Center, otherwise noted

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