Yet, while those things are true, when we zoom out to see what’s happening in other parts of the country it’s clear that we’re fortunate to be living and working in one of the more stable real estate markets in the country.
Ever wonder why we’re so lucky? Consider these statistics from Zillow and the Bureau of Labor Statistics comparing Phoenix to other West Coast markets:
- Phoenix median home price: $211,300, rising 9.5% per year, with 3.9% unemployment
- Denver median home price: $383,200, rising 10.1% per year with 2.1% unemployment – the nation’s lowest.
- Seattle median home price: $670,300, rising 14.5% per year, with 3.2% unemployment
- San Francisco median home price: $1,194,300, rising 5.5% per year, with 3.1% unemployment
The numbers above indicate the expected correlation between rising home prices and employment figures. But there is another, perhaps more important factor that plays into home pricing: the balance between new jobs and housing units built to accommodate those workers.
Got Happy Buyers? Thank a Builder
Consider this. In parts of California there are 6 times as many new jobs as there are housing units being built to house those workers. In Phoenix, that number is 2.5 – the same ratio as in Seattle.
In Denver, the other city in our comparison, the discrepancy between permits and jobs is also remarkable. Like California, Denver also had more than 6 times as many jobs as permits granted for housing to meet those workers’ needs but is more easily able to accommodate those workers in outlying areas. There are fewer topographical restrictions against sprawl.
In Seattle, geography prevents sprawl. The city is surrounded by water and mountains, earthquake prone and hilly, rendering many areas unsafe for building new units. The city also lacks adequate public transportation alternatives. The last factor is regulation. Both California and Washington have more stringent building regulations than most states.
These factors have created an extreme and long-standing housing shortage that prevented extreme price correction during the real estate crash, but is now exacerbating the run-up in prices, rendering Seattle and San Francisco unaffordable for many buyers.
By contrast, although Denver and Phoenix both have low unemployment, prices in Phoenix have remained more reasonable in part because builders have been able to develop new units to accommodate buyers. Prices are also accelerating from a lower baseline, keeping our housing market more affordable.
So, if you like the fact that Phoenix home prices are attractive to buyers, thank a builder!