The nation’s most expensive housing markets are home to a growing share of the nation’s jobs, according to a recent report from Zillow Senior Economist Aaron Terrazas.
To define the nation’s most expensive housing markets, Zillow used four different criteria. This included the 10 markets with the highest median home values, the 10 markets with the worst current mortgage affordability, the 10 markets with the worst historic mortgage affordability, and the 10 markets with the worst change in mortgage affordability.
The analysis found that there is a large amount of overlap between the markets that meet these different criteria. Included in these markets are San Francisco, Los Angeles, San Jose and San Diego as well as New York, Boston, Seattle and Sacramento.
Terrazas reports that there is a clear upward trend in the share of total U.S., nonfarm employment located in each group of markets over the past two decades. Additionally, the share of total U.S. jobs increased in these expensive housing markets in the run-up to the early-2000s, then experienced a decrease in their share of national employment for much of the 2000s. Now, expensive housing markets are seeing once again a historically high share of national employment. Today, approximately one in five U.S. jobs are in one of the 10 metros with the highest overall home values, worst current mortgage affordability and/or worst historic mortgage affordability.
Likewise, the report found that gains have been most concentrated in the markets where housing affordability has deteriorated most.
“Whether strong job growth is the symptom or the cause of deteriorating housing affordability – are these markets less affordable because of strong job growth, or is strong job growth the result of something else making these markets expensive? – is somewhat of a chicken-and-egg question,” says Terrazas. “Both explanations hold some grain of truth, and it’s naïve to entirely disentangle them. Regardless of which comes first, there is little doubt that over the past five years, America’s most expensive housing markets are taking a lion’s share of the country’s employment growth.”