Where Home Prices Are Dampening Job Growth

January 15, 2020

High home prices may be stymieing job growth in some metros. Over the last five years, affordability has worsened in areas that have seen a decline in job growth, according to a report released Wednesday by the National Association of REALTORS®.

Affordability rankings declined in 81 metro areas—in the third quarter of 2019, 34 of them saw non-farm job growth fall faster than compared to the national rate over the previous five years.

These 81 metros are in dire need of more housing inventory to increase affordability and give their job markets a jolt, according to NAR’s study, “Home Affordability Index Ranking and Payroll Job Growth,” which examined the pace of non-farm payroll job growth in the third quarter compared to the average job growth from 2014 to 2018.

“Job growth has slowed in these areas in part because limited supply is making homes less affordable,” says Lawrence Yun, NAR’s chief economist. “As inventory continues to decline and affordability worsens, workers, businesses, and companies are less incentivized to do business in these areas.”

Yun says that worsening affordability and inventory conditions could leave some of the nation’s previously fastest-growing metro areas unable to sustain job and economic growth. “Even fast-growing markets could be hurt and unable to further expand because of weakening affordability conditions,” Yun says. “We must improve affordability by building more homes in line with local job market growth.”

In Boise, Idaho, this trend is particularly evident, NAR notes in its study. That metro saw a large drop in its affordability ranking, falling from 108th in 2014 to 153rd in the third quarter of 2019. The median sales price of single-family homes jumped 75% during that time ($172,000 in 2014 to $303,100 in the third quarter of 2019). As housing affordability worsened, non-farm payroll employment growth slowed 0.8% in the third quarter of 2019 from an average growth during 2014 to 2018 (from 3.9% to 3.2%), NAR reports in its study.

Other metros like Tampa, Fla., and Nashville have also seen a noticeable shift. In Tampa, median single-family home prices climbed 58% from 2014 to 2019. That is three times the growth of median family income, which is 19% for that period. Tampa’s growth then slowed by 0.8 percentage points (2.8% versus 2%).

In Nashville, median single-family sales prices rose 53%, nearly double the area’s median family income growth (23%), NAR’s report notes. The pace of job growth was cut in half as housing affordability worsened there (1.9% versus 3.7%).

Biggest Shifts in Affordability Rankings, as of Third Quarter of 2019

NAR ranked the metro areas with strong job growth from 2014 to 2018 that have since seen a significant shift in their housing affordability rankings:

  • Grand Rapids-Wyoming, Mich.: From 37th ranking in 2014 to 60th in the third quarter of 2019
  • Louisville-Jefferson County, Ky.-Ind.: 51st to 62nd
  • Indianapolis-Carmel-Anderson, Ind.: 46th to 64th
  • Chattanooga, Ga.: 58th to 70th
  • Columbus, Ohio: 57th to 80th
  • Atlanta-Sandy Springs-Marietta, Ga.: 73rd to 91st
  • Spartanburg, S.C.: 83rd to 96th
  • Pensacola, Ferry Pass-Brent, Fla.: 84th to 111th
  • Raleigh, N.C.: 90th to 112th
  • Deltora-Daytona Beach-Ormond, Fla. 94th to 125th
  • Nashville-Davidson-Murfreesboro-Franklin, Tenn.: 105th to 126th
  • Tampa-St. Petersburg-Clearwater, Fla.: 98th to 133rd
  • Lakeland-Winter Haven, Fla.: 89th to 134th
  • Durham-Chapel Hill, N.C. 111th to 137th
  • Jacksonville, Fla.: 117th to 140th

View the full breakdown (PDF) of the largest metros’ affordability ranking and payroll job growth.