How high-tech industry drives housing value
It is widely known that employment and housing prices have a strong correlation with each other, and Job accessibility has been considered as a major driver in the studies about housing prices. However, the effect of job accessibility on housing price changes over time, and the impact and change of employment on housing price vary especially depending on the type of industry and quality of the job.
For example, Richard Florida in his book, ‘Cities and the Creative Class', argues that the human capital working for tech and creative companies is one of the new major economic drivers of cities. In this context, Market Stadium is providing information about employment in various industries for housing market analysis. In this post, we will look at the relationship between employment (total employment and employment in major industries) and housing prices.
The analysis is conducted using Zillow housing prices and the U.S. Bureau of Labor Statistics over 10 years (2012–2021). The types of employment used in the analysis are 1) total employment, which includes employment in all types of industries, 2) Entertainment and Media, 3) Finance, 4) High-tech, and 5) Life Science, which are classified as major industries affecting housing prices by Market Stadium.
Figure 1 below shows the correlation between housing prices and the number of employments by industries in 2021. All the relationships between housing prices and the number of employments by industries are statistically significant at 99% level of confidence. With housing prices, the number of employments in Life Science, and High-tech industry shows a stronger relationship compared to total employment. These results also are aligned with the concepts of the creative class suggested by Richard Florida and related studies(Shapiro 2006, Chapple and Jeon 2021).
Figure 1. Correlation between housing price and the number of employments by industries
Another interesting point is the change in the level of correlation between housing prices and the number of employment by industries. Figure 2 shows the level of correlation of Finance and Entertainment & Media with housing prices is recently deceased or stagnant. On the other hand, the level of correlation with housing price is gradually or rapidly increasing in technology- Intensive Industry including High-tech and Life Science industries.
Figure 2. Change in level of correlation between housing price and the number of employment by industries.
Chapple K and Jeon JS (2021) Big tech on the block: examining the impact of tech campuses on local housing markets in the San Francisco Bay area. Economic Development Quarterly 35(4): 351-369.
Shapiro JM (2006) Smart cities: quality of life, productivity, and the growth effects of human capital. The review of economics and statistics 88(2): 324-335.