Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

15 responses to “Does Job Growth == Home Buying Demand?”

  1. greenthum

    Excellent work Tim! Unfortunately, most residents of “The Emerald City” don’t like having their tender noses rubbed in hard facts and will dismiss anything that challenges their Utopian view of the world. The real-estate party is over but these idiots will be the last ones to know.

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  2. Kaleetan

    Of course job growth alone can hardly be expected to explain home prices, which are influenced by many factors — income growth, demographics, constraints on new construction and, perhaps most importantly, interest rates. Long-term mortgage rates generally ranged from 7 to 8 percent in the late 1990s, compared with 6 percent over the past several years.

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  3. Alan

    Very nice.

    Negative job growth implies that some people are losing their jobs. Maybe people without jobs are more likely to flip properties to make money. More flippers increases demand and results in higher prices.

    The only thing that can sustain prices long term is income. How much income are these new jobs providing? Housing prices that are not supported at the base level of income will topple.

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  4. The Tim

    Of course job growth alone can hardly be expected to explain home prices, which are influenced by many factors…

    Kaleetan,

    I agree completely. However, job growth is often cited as at least a major part of reason that home prices will continue to climb, despite the fact that there is no data to show any correlation. Here are three random quotes from articles we have posted about in just the last few months:

    Seattle real estate professionals and economists agree that the city’s job creation, relative lack of speculators and the fact that its boom never rose as high as other places kept its housing market healthy.
    - 01.17.2007

    We still have job growth and a shortage of lots here, so we have just not had a problem with standing inventory.
    - 12.30.2006

    Availability of jobs props up the housing market, and the job outlook for Western Washington continues to be extremely healthy.
    - 10.15.2006

    The purpose of this post was to point out that such claims are nothing more than hot air. There is no evidence that shows more jobs = more home buying demand. Not only does job growth not explain home prices on its own, it doesn’t explain home prices at all. Not even a little bit.

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  5. Lake Hills Renter

    golly fine work, Tim.

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  6. biliruben

    Nice work, Tim.

    A few quick correlations between change in sales and change in employment:

    Just the simple pearson correlation: is -0.42, meaning they are inversely correlated.

    If you assume that there would be a 6 month lag between getting a job and buying a house the correlation is -0.12.

    Of you assume a year lag, you get a slightly positive 0.15 correlation.

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  7. matt

    I currently live in San Diego. A year ago the prices weren’t going to go down here because we had solid job growth, or low unemployment, or whatever. What crap.

    But then again, Seattle is different. It’s 70 degrees year round and hardly rains. Plus, it’s really close to nice beaches. Everyone wants to live there. That’ll keep prices up forever! ;)

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  8. Kaleetan

    “The purpose of this post was to point out that such claims are nothing more than hot air. There is no evidence that shows more jobs = more home buying demand. “

    Tim, There might not be “hard evidence” that more jobs are directly related to home buying demand, but common sense would tell you that a stong job market is good for local real estate and likewise a bad job market is bad for local real estate( detroit ).

    Do you not agree?

    Its fine for journalists to use these common assumptions in their articles.

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  9. disgruntledengineer

    kaleetan,

    I’m surprised you didn’t do your usual picking of quotes to take some cheap shot back at Tim or some other poster. As far as your “common sense” argument, that is about the weakest, most dense statement…I can’t even describe it. How can you say that after reading 6 months of your comments–as well as shug’s, trackbike’s (mia), financerugu, dalas (mia)–of demanding the “hard evidence” you so nonchalantly disregard. This whole housing market makes no “common sense.” kaleetan, it also takes a bit of common sense to realize that homes are not priced where they should be, and that people who are not able to afford a home, should not be tricked into utilizing shady financial tools to provide the false sense of ownership. How’s that for common sense? All this work to provide hard numbers for you, and all you do is say “duh, common sense?” What a joke.

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  10. Kaleetan

    “I’m surprised you didn’t do your usual picking of quotes to take some cheap shot back at Tim or some other poster. “

    Disgruntled,
    Its my new years resolution to be the a kinder gentler poster.

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  11. Deja Fouts Realtor

    Wow Tim-

    Great work!!

    I love the graphs it is great to see data busting market myths.

    I have a few questions.

    1. Do you have stats for the gap between average and median home values?

    2. What % of the upper end of your market is custom built homes?

    3. What do the graphs look like using average home values vs. job growth?

    4. Why did you use pending sales vs. closed sales?

    The graphs are great! I think I am going to work up similar ones for my market.

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  12. Washington Job Market Still Growing Slowly | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] covered this subject pretty thoroughly here before, and a present-day example can be seen down in San Diego, where [...]

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  13. Welcome to Seattle Bubble | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] (1, 2, [...]

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  14. Is it a good time to buy? Salespeople say YES! | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] busted the “job growth will keep home prices propped up” myth here so many times, it’s not even funny. Yes, if the jobs situation was cruddy, the housing market [...]

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  15. Gangbuster Job Growth, Lackluster Incomes | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] as you all know, we’ve beat this subject to death around here, but Seattle Times business reporter Drew DeSilver brought some [...]

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