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Choosing A Metro Area Based on Pennsylvania Housing Elasticity

09 Aug 2016 8:30 AM | Craig Hoffman (Administrator)

This article was written by: Katie Bassett, Trulia

When it comes to choosing a metropolitan area to settle down in, thousands of factors come into play, but making the decision of where to buy is sometimes difficult. Often, home buyers inspect neighborhood quality, public education zoning, housing infrastructure, and much more; yet there is an important factor that can help you significantly narrow your search efforts. Housing elasticity is the correlation between the home price growth and the housing stock growth and it measures overall housing affordability in a given area.

U.S. Housing Elasticity

National trends in the past years suggest homebuilding is weak as prices are rising. However, each major metro area tells a different story. Trulia recently analyzed housing markets on a national scale in its recent report, and found long-run housing supply elasticity averages of .17 unanimously, which is three points under the 30 year national average.

Elasticity in Pennsylvania

Looking at long-run elasticity on a local level, variances occur based on a number of metropolitan factors. Honing in on Pennsylvania, Pittsburgh’s market has had the second lowest housing supply elasticity in the past 20 years. In fact, two major Pennsylvania metros reside in the top 10 markets with the lowest elasticity.

Markets with the Lowest Housing Supply Elasticity

U.S. Metro

% Increase in Housing Stock,
1996 -2016

% Increase in Housing Prices,
1996 -2016

Housing Supply Elasticity,
1996 -

New Orleans, LA




Pittsburgh, PA




Los Angeles-Long Beach, CA




San Francisco, CA




Buffalo-Niagara Falls, NY




Scranton-Wilkes-Barre-Hazelton, PA





Here, we take a look at the top five metros in Pennsylvania to analyze and compare housing elasticity from 1996-2016. Trends and percentage increases reflect directly on the area’s housing efforts in the past 20 years, which can help develop new expectations for what lies ahead.


As mentioned above, real estate in Pittsburgh has proven to be rather stingy. From 1996-2016, prices have increased 99% in Pittsburgh and housing stock has only increased by 3.9%. An extremely low elasticity of .04 tells us that the gap between home price growth and housing stock growth is low, which reflects the efforts of Pittsburgh providing new affordable housing.


Also coming in the top 10 cities with the lowest housing supply elasticity is Wilkes-Barre. The Scranton/Wilkes-Barre/Hazleton metro area has an overall housing supply elasticity of .05 from 1996-2016. Housing prices increased by 85.4% in the area, with an overall housing stock increase of 4.7%. Similar to Pittsburgh, it can be assumed that the Wilkes-Barre housing market inelasticity corresponds directly with affordable housing availability in the area.


While Philadelphia, the largest metropolitan area within Pennsylvania, escaped the top 10 least elastic cities in the country, the area still ranks fairly low in elasticity ratings. In the past 20 years, we saw housing prices increase 105.1% in the area, while housing stock only increase by 10%, totaling a housing elasticity of .10. Granted, the density of Philadelphia does come into play. With the area already being so heavily populated, this makes it more difficult to increase housing stock. Trends indicates that real estate prices climb when less is available- the idea that people want homes in areas that are limited and essentially more exclusive.  


Allentown sees slightly more elasticity, when comparing to other major cities within Pennsylvania. Totaling a housing supply elasticity of .25, Allentown’s housing prices have increased 67.5% in the past 20 years. Additionally, there has been an increase in housing stock of 17% in the area.  


Of all the major metropolitan areas within Pennsylvania, the real estate market in Harrisburg has proven to be the most elastic, coming in at .27. In the past 20 years, Harrisburg’s home prices have increased by 67.1% while the housing units added has increased by 18.4%. This indicates that, while this metro area is in no means perfect, this area does offer more affordable housing options, relative to price increase and home availability.

What Does This Mean for Pennsylvania Housing Market?

Why should this matter you? Either extreme of elasticity can be bad for the real estate market which means finding the perfect balance is essential. Cities with high elasticity can potentially see a high rate of foreclosures. On the other hand, metropolitans with low elasticity, like Pittsburgh, aren’t providing affordable housing options for those looking to buy a home. On a national scale, the country has fluctuated with a housing elasticity of .13 and .29, which is pretty similar to both Allentown and Harrisburg. Population density and open land directly reflect price as well as housing units, along with several other factors, which is why we could see smaller metros like these have more affordable housing availability.


This article was written by: Katie Bassett, Trulia

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