Saturation on the coasts have business searching for other ways, and places, to cut costs
SEATTLE, Aug. 10, 2016 /PRNewswire/ — As businesses look for cheaper places to expand, job growth in the middle of the country will begin attracting more residents, according to experts surveyed in the latest Zillow® Home Price Expectations (ZHPE) Survey.
That would reverse a trend over the last decade that drew many to the coasts following strong job markets, with more employment and income growth. Over half of experts surveyed said they don’t expect migration to the coasts to continue indefinitely. Of those, 56 percent pointed to jobs and 24 percent said high housing costs on the coasts will drive residents inland.
Recovery from the housing boom and bust has looked very different for Middle America and coastal America. While markets on the East and West coasts experience rapidly rising home values and strong job markets, markets in the Rust Belt and Midwest are moving more slowly; negative equity is still prevalent and job growth is minimal.
The quarterly ZHPE survey, sponsored by Zillow and conducted by Pulsenomics LLCi, asked more than 100 housing experts about their expectations for the housing market.
The experts were also asked if they thought the distinct split between Middle America and the two coasts would reverse. Over half of the respondents said this trend has already begun to reverse, or expect it to in the future. A quarter of respondents believe this trend is a permanent shift, and 11 percent believe the migration to the coasts is an illusion.
Of the reasons experts predicted people would move back to the middle of the country, job growth was most popular. Just over 20 percent said people would migrate inland in search of more affordable housing, and 13 percent said Americans will start to seek the traditional lifestyle that the middle of the country has to offer. Only 2 percent said climate change will force residents away from the coasts.
“Since the Recession, employment has boomed in relatively expensive coastal areas, often attributed to a shift in preferences among workers – especially millennials – but also facilitated by soft labor markets that have resulted in a plentiful supply of available workers,” said Zillow Chief Economist Dr. Svenja Gudell. “Now, as labor markets tighten and the country approaches full employment, employers will have to look elsewhere to keep costs in check. For some businesses, this will mean relocating away from expensive coastal areas to more affordable interior communities. Sooner or later workers will follow the jobs, providing an impulse to local housing markets.”
Home values on the rise
Overall, the experts surveyed predict home price appreciation across the country will be up over 4 percent year-over-year by the end of 2016. They expect home prices to slow down over the next four years and by the end of 2020, they predict home prices will grow at an annual pace of just 2.9 percent.
“Panel-wide, the experts currently expect U.S. home values to finish 2016 with a healthy 4.5 percent year-over-year gain,” said Pulsenomics founder Terry Loebs. “This projection implies a somewhat cooler, but still solid, second half of the year. Although further price moderation is expected next year, nearly 90 percent of the panel is projecting lower home value gains in 2017. The longer-run outlook for housing market performance remains steady. Overall, the expected five-year average annual growth rate for home values actually rose, albeit slightly, for the first time in three years.”
Predominant reason housing markets in Middle America will re-gain popularityii
Job growth in the middle of the country will begin attracting more residents as corporations look for cheaper places to expand
High housing costs in coastal markets will push many residents away and toward cheaper markets in the middle of the country
In the future, Americans will seek traditional quality of life advantages that housing markets in Middle America offer
Climate change and increasingly damaging and volatile weather will force more Americans away from the coasts
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
Pulsenomics LLC (www.pulsenomics.com) is an independent research and consulting firm that specializes in data analytics, new product and index development for institutional clients in the financial and real estate arenas. Pulsenomics also designs and manages expert surveys and consumer polls to identify trends and expectations that are relevant to effective business management and monitoring economic health. Pulsenomics LLC is the author of The Home Price Expectations Survey™, The U.S. Housing Confidence Survey, and The U.S. Housing Confidence Index. Pulsenomics®, The Housing Confidence Index™, and The Housing Confidence Survey™ are trademarks of Pulsenomics LLC.
i This edition of the Zillow® Home Price Expectations Survey surveyed 113 experts between July 19 and August 3, 2016. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc.
ii Of experts who said that the trend between Middle America and coastal markets has already begun to reverse, or expect that it will reverse.