The booming levels of renter demand that prevailed throughout 2021 and early 2022 have given way to slower absorption rates heading into 2023. The multifamily market moderated after an exceptionally strong run that followed record demand stemming from three rounds of stimulus checks, record growth of wages, and extremely high competition for home ownership. Rent growth peaked at 10% in late 2021 and has been slowing since, tallying around 3% as of the first quarter of 2023, with a market-wide vacancy rate near all-time lows of 5%.
The Philadelphia Metro housing market remains exceptionally tight, with the total number of vacant units down by about 30% compared to pre-pandemic levels. Meanwhile, even as rising mortgage rates have caused home sales to slow, the inventory of homes listed for sale in suburban counties such as Chester and Montgomery remains a small fraction of what it was just five years ago, which is keeping more prospective homebuyers locked in the renter pool.
Multifamily construction has reached an all-time peak in recent months both around Center City and in the suburbs. Net deliveries are expected to average 2,200 units per quarter during 2023, up more than 45% from completions seen over the past two years.