Job growth is the most important factor in determining real estate demand. The number and quality of new jobs in an area determine how many new households will be formed and how many people will move into or out of the area.
The number of jobs in an area is one of the most important indicators of the housing market’s future. The housing market will likely decrease if there are fewer jobs. However, the housing market will likely improve if there are more jobs.
Employment data and trends heavily influence the Federal Reserve’s monetary policy decisions. The Fed may lower interest rates to encourage job growth if economic growth is sluggish. This, in turn, can lead to increased demand and investment, which can help to jumpstart the economy and get it back into a growth cycle.
Here’s how job growth turns into better investments:
1. Higher-Paying Jobs Enables People to Purchase a Home
A job provides an income that can be used to pay for housing. The demand for housing is influenced by the number of employed people and their employment stability. The cost of housing varies depending on the location and the amount of debt people have.
The millennial generation is a good example of why you shouldn’t rely solely on jobs when predicting where the real estate market is headed. This group entered the job market during the Great Recession, which made it difficult for them to find stable jobs.
As a result, this generation has a harder time achieving home ownership as they age into their 30s and are more likely to rent for longer periods. High student debt loads also contribute to their inertia as renters, which bodes well for residential investors.
2. Higher-Paying Jobs Allows for Renting a Better Space
In cities with a high demand for rental properties, investing in real estate can create opportunities for investors. One study found that New York City has invested the most in multifamily buildings since 2000, followed by Los Angeles, Dallas, and Houston.
In Texas, the high demand for rental properties after Hurricane Harvey led to the development of new residential projects in Greater Houston. The demand for workforce housing and housing for people displaced by Hurricane Harvey has helped to stabilize the rental market. Investors can use data on expanding jobs and property to predict future investments.
3. A Good Job Market Means More People Are Moving to the Area
If an area has a good job market, more people will likely move there searching for work. This increased population can lead to higher demand for rental properties and, as a result, higher prices. For investors, this is a good time to buy property in an up-and-coming area before prices rise too much.
4. A Stable Job Market is Key to Sustaining Real Estate Prices
A stable job market is key for sustaining real estate prices because people are more likely to keep their jobs and have the income necessary to pay their mortgage or rent payments on time. If there’s high unemployment in an area, however, this can lead to defaults on loans and foreclosures, which can then lower home values.
Job growth leads to better investments. This is because more money is circulating in the economy when there are more jobs. This, in turn, leads to more investment opportunities and more money to invest. Furthermore, when there are more jobs, there is more consumer confidence, which leads to more spending. This increased spending leads to more investment and more economic growth.
At Evergreen Investments, we connect homeowners to wealth-building opportunities from their residential real estate assets. We are a real estate service provider for property owners and investors with industry-leading investment real estate research and world-class advisory and transaction services. Our team provides unparalleled market knowledge, access to hidden investment off-market opportunities, and real estate-related advisory and property support for a lifetime. If you need help with property investment sales, look no further! Get in touch with us and let us know how we can help!