SEATTLE, Aug. 2, 2018 /PRNewswire/ -- As the economy
has recovered, both the job market and home values have seen strong
growth. But in places where residential land use has the strictest
regulations, and which often struggle to accommodate new housing,
strong job growth is associated with a much larger increase in home
values.
Using the Wharton Residential Land Use Regulation Index[i],
Zillow® compared job growth[ii] and home value appreciation since
2010, grouping markets by how strict their regulations are. Job
growth overall is correlated with home value growth, but how much
home values grew in a given market depended in part on the
regulations builders face when adding new homes, including density
laws and permit review times.
Between 2010 and 2017, home values across the country increased
by 14 percentage-points for every 10 percentage-point increase in
jobs. In markets with the most restrictive regulations, home values
grew 25 percentage-points for every 10 percentage-point increase in
employment over that same time period.
In San Francisco, where strict
regulations are combined with physical land limitations, home
values rose 58.8 percent between 2010 and 2017 as employment grew
23.2 percent during those years. Similarly, Miami home values grew 62.5 percent as jobs
grew 19.2 percent.
Home value appreciation was smaller in areas with less-strict
regulations. Job growth in Dallas,
a moderately restrictive market, was similar to that in
San Francisco, but home value
growth was milder, increasing 37.1 percent.
"As the housing market has recovered from the Great Recession
and collapse in home values, a new challenge emerged that is
driving market dynamics – the shortage of homes for potential
buyers," said Zillow Senior Economist Aaron
Terrazas. "We've seen inventory falling on an annual basis
for more than three years now. As a result of job and population
growth, housing demand has overwhelmed the inventory of
pre-existing homes and builders are facing a number of challenges
in adding new supply, including regulatory costs. In hot job
markets with some of the strictest laws about building new
residential housing, home values experience the most pressure. It's
helped home values recover and exceed their previous highs, but
leaves many home shoppers unable to break into the market."
Growing job markets add to the demand for housing, and the
number of homes[iii] increased as employment grew, regardless of
how strict the regulations are. However, markets with the most
restrictive laws added less housing than places with easier
building laws. Between 2010 and 2017, markets with the tightest
building regulations increased their housing stock by 4.4 percent,
while markets with the loosest restrictions added 4.6 percent more
homes.
Metropolitan
Area
|
Regulation
Level
|
Employment
Change 2010-2017
|
Home Value
Change 2010-2017
|
Housing Stock
Change 2010-
2017
|
United
States
|
N/A
|
12.6%
|
19.6%
|
4.2%
|
New York,
NY
|
Most
Restrictive
|
11.9%
|
5.3%
|
2.5%
|
Los Angeles-Long
Beach-Anaheim, CA
|
Most
Restrictive
|
13.9%
|
39.6%
|
3.3%
|
Chicago,
IL
|
Moderately
Restrictive
|
10.6%
|
2.9%
|
1.2%
|
Dallas-Fort Worth,
TX
|
Moderately
Restrictive
|
22.6%
|
37.1%
|
10.3%
|
Philadelphia,
PA
|
Most
Restrictive
|
7.1%
|
-1.2%
|
2.2%
|
Houston,
TX
|
Moderately
Restrictive
|
17.5%
|
31.6%
|
12.9%
|
Washington,
DC
|
Most
Restrictive
|
9.0%
|
18.1%
|
5.3%
|
Miami-Fort
Lauderdale, FL
|
Most
Restrictive
|
19.2%
|
62.5%
|
2.9%
|
Atlanta,
GA
|
Moderately
Restrictive
|
19.2%
|
19.8%
|
5.8%
|
Boston, MA
|
Most
Restrictive
|
13.0%
|
29.0%
|
3.8%
|
San Francisco,
CA
|
Most
Restrictive
|
23.2%
|
58.8%
|
3.8%
|
Detroit,
MI
|
Moderately
Restrictive
|
16.1%
|
56.2%
|
1.0%
|
Riverside,
CA
|
Most
Restrictive
|
24.1%
|
59.1%
|
3.8%
|
Phoenix,
AZ
|
Most
Restrictive
|
18.8%
|
50.0%
|
6.1%
|
Seattle,
WA
|
Most
Restrictive
|
19.8%
|
37.8%
|
8.6%
|
Minneapolis-St Paul,
MN
|
Most
Restrictive
|
14.1%
|
21.0%
|
4.3%
|
San Diego,
CA
|
Most
Restrictive
|
16.5%
|
42.3%
|
4.2%
|
St. Louis,
MO
|
Least
Restrictive
|
8.0%
|
2.7%
|
2.6%
|
Tampa, FL
|
Moderately
Restrictive
|
16.6%
|
35.4%
|
4.8%
|
Baltimore,
MD
|
Most
Restrictive
|
9.6%
|
1.6%
|
2.5%
|
Denver, CO
|
Most
Restrictive
|
22.6%
|
60.8%
|
8.6%
|
Pittsburgh,
PA
|
Moderately
Restrictive
|
3.9%
|
16.5%
|
2.2%
|
Portland,
OR
|
Moderately
Restrictive
|
19.8%
|
45.6%
|
7.2%
|
Charlotte,
NC
|
Moderately
Restrictive
|
23.9%
|
18.2%
|
9.6%
|
Sacramento,
CA
|
Most
Restrictive
|
12.6%
|
45.2%
|
3.4%
|
San Antonio,
TX
|
Moderately
Restrictive
|
21.2%
|
24.9%
|
6.4%
|
Orlando,
FL
|
Most
Restrictive
|
26.1%
|
36.2%
|
9.6%
|
Cincinnati,
OH
|
Least
Restrictive
|
9.9%
|
11.4%
|
2.3%
|
Kansas City,
MO
|
Least
Restrictive
|
12.0%
|
9.8%
|
4.3%
|
Las Vegas,
NV
|
Least
Restrictive
|
19.3%
|
50.8%
|
6.9%
|
Columbus,
OH
|
Moderately
Restrictive
|
15.9%
|
18.5%
|
4.9%
|
Indianapolis,
IN
|
Least
Restrictive
|
15.3%
|
14.4%
|
5.2%
|
San Jose,
CA
|
Moderately
Restrictive
|
26.7%
|
69.2%
|
6.2%
|
Austin, TX
|
Moderately
Restrictive
|
29.7%
|
42.8%
|
16.9%
|
Virginia Beach,
VA
|
Moderately
Restrictive
|
4.6%
|
-2.3%
|
4.4%
|
Zillow
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industry-leading economics and analytics bureau led by Zillow
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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
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[i] The most comprehensive nationwide effort to summarize
regulatory conditions is the Wharton Residential Land Use
Regulation Index, which compiles the results of a survey sent to
city planners across the country in 2007. This analysis used the
index to categorize all the metropolitan areas with survey
responses into three groups: those with the most restrictive,
moderately restrictive, and least restrictive regulations.
[ii] Jobs data comes from the Bureau of Labor Statistics
[iii] Housing stock data comes from the U.S. Census Bureau
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SOURCE Zillow