High Interest Rates and Low Inventory Keep Philly Millennials Renting

Julia Falcon and Pete Ceran in front of their Mount Airy rental rowhouse / Photo by Pete Ceran

In a long-ago age and time — say, five years or so ago — Julia Falcon and Peter Ceran would now be raising their first child in the first house they’d ever bought.

Instead, Falcon, a 36-year-old Temple University staff member, and Ceran, a 37-year-old digital marketer, are raising their one-year-old son in a house they’re renting in Mount Airy.

And it’s not like they deliberately chose to remain renters.

“We did discuss buying a house,” says Falcon. “It would have been about August 2023. We were definitely moving out of the rental apartment we were in. And we were considering potentially buying, and we spent about two months looking around and checking out some options.

“In the end, we decided it was too much,” she continues. “It was too expensive, it was too competitive, and it felt like we would be rushed into a situation where we would make a purchase that was out of our budget and be pushed to make it so fast that we wouldn’t have time to discover that there’s some huge issue.”

“The realtor recommended that if we were serious about purchasing a house, we should waive inspection because that’s what all the other top bidders were doing at the time,” says Ceran. “And that was very scary, because we would essentially be putting our life savings into a house with no vetting whatsoever.”

As Falcon put it, the couple started house-hunting as a “perfect storm” grew to where it drowned their dreams of homeownership. A jump in prices — they say that homes in 2023 cost anywhere from $100,000 more to double what they had been selling for the year earlier — and a concurrent rise in interest rates led them to remain renters instead.

In remaining renters, Ceran and Falcon are riding the crest of a wave sweeping the country. According to American Community Survey data analyzed by Zillow, the median age of all renters in the country has risen nine years in the last three, from 33 in 2021 to 42 in 2024. And while Baby Boomer renters account for the bulk of the upward drift — they accounted for 12 percent of all renters in 2021 but double that percentage last year — as millennials have aged, they remain renters in higher numbers than their elders had as they aged.

Monthly childcare expenses that roughly equal their rent would put houses like this renovated twin currently for sale near them out of Falcon and Ceran’s reach. Without them, this renovated four-bedroom twin would have an estimated mortgage payment barely within their monthly housing budget. / Bright MLS image via exP Realty; virtually staged photo

“Many millennials are staying renters for longer, especially compared to the generations before them,” says Amanda Pendleton, Zillow’s home trends expert. “But these millennials are not letting their renter status delay other life milestones, like living with a partner, pet ownership, or starting their family. This has fueled demand for single-family rentals in particular, which is why rents for these homes have increased so much more rapidly than rents for multi-family homes.”

Another reason they opted to remain tenants: They weren’t terribly thrilled with the condition of the houses they saw. Falcon estimated that about three-quarters of the houses they toured had “something weird or wrong going on.

“They had clearly been flipped, and cheaply,” she says. “Someone came in, dumped a little bit of money making it look nice, but nothing actually works. [Or] they’ve added a bedroom or a bathroom to increase the number of rooms, but you walk into the bedroom and it’s tiny — it’s like a little closet.”

Their troubles there are related to the low inventory of houses on the market.

“Anybody who’s had a mortgage for more than a few years is going to not want to move,” says Molly Boesel, principal economist at CoreLogic. “They’ve got pretty low interest rates, so that keeps the inventory low.

“But high interest rates are also affecting new construction. New construction is facing all the same inflationary issues as the rest of the housing market and the economy overall.”

Also contributing to the dearth of inventory in the city is the halving of the property tax abatement for residential construction, which took effect at the beginning of 2022. That move all but halted the production of new single-family houses in the city.

According to the Zillow Observed Rent Index, rent for the typical detached single-family home in the Philadelphia area at the end of 2024 was $2,118, an increase of 38 percent from pre-pandemic levels. By comparison, the typical rent for a unit in a multi-family building stood at $1,769, 20 percent below the single-family home figure. That number represents a 23 percent rise from pre-pandemic levels.

A millennial couple raising a family might have made a house like this renovated Mt. Airy rowhouse their starter home had they been in the family way four years ago. Unfortunately, a combination of higher interest rates and fewer houses for sale have led couples like Falcon and Ceran to remain renters. / Bright MLS image via Compass

CoreLogic’s Single-Family Rent Index for November 2024 found that the median single-family rent in Philadelphia and Delaware counties (the Philadelphia Metropolitan Division of the Philadelphia MSA, consisting of the two most densely populated counties in the metropolitan area) was even more affordable: it clocked in at $1,634, making the Philadelphia Metropolitan Division one of only three of the 20 markets CoreLogic measured with median monthly rents under $2,000 (the others are Detroit and Houston).

Ceran and Falcon are paying about $1,850 per month for their three-bedroom Mount Airy house, comfortably under their monthly budget of $2,200. The couple would have had an even harder time finding an apartment they could rent in the suburbs, however. According to CoreLogic data, the median rent for a single-family dwelling in Chester and Montgomery counties was $2,500 a month, while in Bucks County, it was $2,150.

The couple do plan to have a second child, though they haven’t yet decided exactly when. As they like the location of their house — it’s right on Germantown Avenue and a short walk from a supermarket, a library, a playground and Mount Airy’s lively business district — they say they will likely reconfigure how they use their house rather than move.

But if they do decide to move, they may find they will have a better chance of buying a house the second time around. At least one knowledgeable observer of the local real estate market — Larry Flick V, president of Berkshire Hathaway HomeServices Fox & Roach Realtors, the region’s largest brokerage — predicts that in 2025, many of those homeowners who have been sitting on the sidelines waiting for interest rates to drop will go ahead and move because their life situations make it necessary, regardless of interest rates.

And if that happens, we may see Ceran, Falcon and other millennial couples like them finally become homeowners.