The homeownership rate in Philadelphia declined sharply between 2000 and 2012, primarily as a consequence of the prolonged and sweeping real estate downturn that followed the bursting of the housing bubble in 2006-07, according to a study released Wednesday by the Pew Charitable Trusts.
Although Philadelphia's homeownership rate remains high among the nation's 30 largest cities, the 7.1 percentage-point drop in owner-occupied units - from 59.3 percent to 52.2 percent, or by 47,082 - was surpassed only by Phoenix, which suffered record foreclosures and price declines when the market swooned, the Pew study shows.
Stagnant incomes, rising home prices, and tight credit, all products of the recession, have cut into owner-occupied numbers, the study showed.
In addition, young professionals who once were the chief source of first-time buyers are either wary of homeownership or burdened by student-loan debt.
Declining homeownership rates increased the percentage of Philadelphians who rent. The gap between owners and renters tightened, with 277,323 renters vs. 302,551 homeowners, the study shows.
What is happening in Philadelphia "is in line with national trends," said economist Kevin Gillen, senior research consultant at the Fels Institute of Government at the University of Pennsylvania.
What struck Gillen was that the decline was the second-highest among the largest cities.
"One factor, presumably, is that Philadelphia had a higher starting point in terms of homeownership," said Larry Eichel, director of the study for Pew, "so it had further to drop."
But as to exactly why homeownership dropped, there are no hard data on which to base a firm conclusion, Eichel said.
"It may just be a statistical artifact, rather than some larger systematic shift," Gillen suggested.
"This recent decade saw the first net increase in our population since 1950, combined with the biggest house-price deflation since the Depression, both of which drove the rental rate higher and homeownership lower," Gillen said.
The decline of the last dozen years continues a trend reported by the Brookings Institution in a study published in 2003, which found that the city homeownership rate had dropped considerably during the 1990s "in contrast to the trend of rising homeownership in cities and the nation over the decade."
That decline, and the 24,000 vacant houses in the city reported by a 1995 Temple University study, were products of an aging population - 185,000 homeowners were 55 and older - and the loss of Philadelphia's industrial base.
The drop in the last dozen years was sharper, because the downturn was almost as severe as the Great Depression. Census data show the 1990 homeownership rate at 61.9 percent, compared with 59.3 percent in the 2000 census.
Nationally, the homeownership rate has fallen from 69 percent to 65 percent over the last 10 years, and "will bottom out in the next couple of years at closer to 64 percent," said Mark Zandi, chief economist of Moody's Analytics in West Chester.
"Driving homeownership a bit lower is the end of the foreclosure crisis and the coming of age of millennials, who will mostly rent for another decade or so," he said.
Tight mortgage credit and "lingering skepticism over owning will also weigh on homeownership" in Philadelphia, Zandi said.
Not all city neighborhoods are being affected in the same way, the Pew study shows.
The highest homeownership rate is in what it calls "Torresdale North," the 19154 zip code. It is at 82 percent, up 1 percentage point from the 2000 census.
"This is the Far Northeast," said Mayfair Realtor Christopher J. Artur, "places such as Normandy, East Torresdale, Parkwood and Woodhaven," along the Bucks County line.
"It has the newest and largest rowhouses in the city, was long attractive to firefighters and police officers, has all of its Catholic schools intact and the better public schools," he said.
The Lower Northeast - Oxford Circle, Frankford, Castor Gardens and Mayfair - has seen a major shift from owner-occupied to rental, the Pew study found.
"A tremendous amount of rental has appeared in the last 20 years," Artur said. "People couldn't sell so they rented, and investors scooped them up. First-time buyers couldn't compete with investors nor could they get mortgages."
Germantown (19144) has a 38 percent rate that is 3 percentage points lower than 2000.
Germantown "has remained relatively stagnant," developer Ken Weinstein said. "Housing is cheap, so we are starting to see pioneers and entrepreneurs who have been priced out of other city neighborhoods."
Developer John Westrum, who is building rental apartments in Brewerytown in Northwest Philadelphia instead of for-sale units, as he did in the boom years, agrees. He said that rents are getting so high in the core Center City neighborhoods that it makes people think about owning and investing elsewhere.
While the neighborhoods surrounding Center City have experienced increases in owner-occupied units, the central business district has a lower homeownership rate than most other neighborhoods. The 19102 zip code - Center City West - is just 20 percent, and there is an increase in luxury rentals.
Developer Carl Dranoff calls these apartment-dwellers "renters by choice."
"The people we rent to are 'eds and meds' - people at Jefferson and Pennsylvania hospitals," said Marianne Harris, sales and marketing director for Dranoff Properties. "They don't know how long they will be here, and won't buy here."
Other renters are downsizers from the suburbs "trying out city living," and even people with children, "which I find extraordinary," Harris said, adding that when she was working with Historic Landmarks for Living in the 1980s, "they rented until they could accumulate a down payment."
Some neighborhoods in and around Center City have seen upticks in homeownership in recent years.
Mickey Pascarella, of Keller Williams Realty, said that despite the very recent focus "on rehabbing anything and everything into rental product, the overall 10-year trend I see on the ground in places like Graduate Hospital and Passyunk Square is older homes being modernized and sold to first-time buyers."
Chinatown/Washington Square West, which traditionally had a low-homeownership rate, has seen a 10 percentage-point increase in the last 12 years from the Pearl Condominiums at Ninth and Arch Streets, and the Western Union and Victory Buildings.
"Low- and mid-rise conversions projects, like Roberts Quay at 1035 Spruce St. and the Clinton at 1023 Clinton St., and brownstone conversion projects along Spruce Street," are examples, said Mark Wade, of BHHS Fox & Roach Realtors.
The Pew survey said it remains to be seen whether the current decline in homeownership is the beginning of "a fundamental change in the city's makeup, and whether that change turns out to be good, bad, or just different."
It is different already, said Harris, of Dranoff Properties: "At 10 Rittenhouse, people bought units, then had to move out of town and kept them as rentals - a two-bedroom for $13,000 a month.
"That's $156,000 a year. You could buy something for that."