Just as housing supply and demand are imbalanced, jobs and housing are mismatched. What does this mean for real estate investors?
Housing Scarce in Big Metro Areas, Not Jobs
Just as supply and demand in the housing market have been imbalanced, jobs and housing supply in large metro markets are out of whack.
San Francisco is a perfect example of such a mismatch. Jobs are plentiful in the San Francisco Bay Area. Housing is not…and affordable housing, even for households earning mid-six-digit salaries, located within a reasonable commuting distance is almost non-existent. Not only does San Francisco have very real geographic limitations on the amount of possible housing supply, it also has very strict zoning codes on where and the type of housing that can be built. The result? Through the roof home prices.
Not only are jobs-housing mismatches drags on wannabe homeowners, these mismatches are economic and environmental drags. Economic growth is slower than it would be otherwise and the environment is more substantially impaired when workers have to drive long distances back and forth between jobs and houses they can afford.
Any Beneficiaries of Jobs-Housing Mismatches
Absolutely! More “affordable” cities, REITS and investors in single-family rentals.
Because new homebuilding came to an essential halt during the housing crisis of 2008-09 while the US population continued increasing, it’s estimated the housing industry is “missing” some 4.5 houses. This shortage has caused home price appreciation to escalate beyond anyone’s imagination.
The result…tech companies have been leaving expensive urban areas for cheaper cities such as Austin TX, Phoenix AZ, Miami FL and Las Vegas NV for lower home prices and lower tax structures. In Austin alone, real estate prices have risen +39% in the last year alone.
Likewise, real estate investment trusts, REITs, that develop high-end apartment buildings in urban and dense suburban metros (San Francisco, New York, Seattle, Washington DC) are doing handstands. Demand is high from well-paid workers who prefer walkable urban environments, occupancy rates are up, rents are rising, and new leases are being reset to mirror market levels. All of these plus-side market realities are driving REIT earnings and dividends forward.
Remember to include companies and investors who buy and build single-family homes for rent as beneficiaries of this jobs-housing mismatch. Not only are these companies/investors generating solid and increasing rental income from their involvement in the single-family rental sector, they are benefitting from steep price appreciation on their properties.
The pandemic and its remote working solution have rendered living close to work past tense. Many workers are now living where they want and can afford to live while simultaneously keeping their jobs. Workers now working in remote and on-site hybrid working combinations may just encourage multifamily building in dense urban metros.
Thanks to Millionacres.