Job growth is driving home price gains in cities nationwide, with 9 out of 10 metros with the sharpest price gains experiencing at least 2% year-over-year job growth, according to real estate site Trulia.
While some suggest the biggest home price increases are tied to markets that had more severe housing busts, Trulia says the rebound effect is over in a recent article. Instead, jobs are pushing prices up. Why?
“A growing economy fuels housing demand,” Chief Economist Jed Kolko writes. “Among the 10 metros with the biggest year-over-year price increases, nine had at least 2% year-over-year job growth. Only Detroit made the price growth top 10 despite tepid job gains.”
Topping that list are Atlanta, Ga.; Cape Coral-Fort Myers, Fla.; Deltona-Daytona Beach-Ormond Beach, Fla.; Oakland, Calif.; and Houston, Texas.
In January, these rising cities boasted year-over-year job growth of 3.3%, 6.3%, 2.3%, 2.7% and 3.2%, respectively.
Accordingly, the metros saw asking price gains of 16.2%, 15.4%, 13.9%, 13.8% and 13.8%, respectively, year over year.
“Throughout the recovery, home prices have risen faster in markets with stronger job growth,” Kolko writes. “What is notable is that the link between job growth and home prices is strengthening.”
Across all 100 largest metros, the relationship between job growth and home prices is strong, with a correlation of 0.56, which Trulia notes is “statistically significant.”
However, what’s really news is that the rebound effect is melting away, Kolko suggests. For much of the recovery, the rebound effect was more closely tied to local price gains than job growth was. But today, that has reversed: Job growth is now much more important than the rebound effect.
“As home prices have increased and gotten close to long-term normal levels, and as investors and foreclosure sales have become a smaller part of housing activity, fundamental drivers of housing demand — like job growth—have taken over again,” Kolko writes.
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Written by Emily Study