Skip to content

The Impact of the Tech Boom on Housing

Housing

The Impact of the Tech Boom on Housing

Housing

Combining Census Bureau and Zillow Housing Data Show Rise in Rental Prices and Home Values in Tech-Rich Areas

Component ID: #ti1588946718

You’ve heard of the “Amazon Effect.” Now you can see it.

By combining U.S. Census Bureau data and their own housing listings, economists from Zillow, an online real estate search engine, have been able to show just how much rental prices and home values have skyrocketed in areas across the country that are experiencing a tech boom.

Component ID: #ti513628707

Zillow combines housing data and Census Bureau data to help understand the link between housing prices and the tech boom.

Component ID: #ti2069558094

During a recent Local Employment Dynamics (LED) Webinar Series, “Housing and the Tech Boom,” Aaron Terrazas, a former Zillow senior economist who is now director of economic research for a Seattle startup, showed how Zillow combines housing data and Census Bureau data to help understand the link between housing prices and the tech boom.

Component ID: #ti1655130797

The Amazon Effect

South Lake Union, once an industrial area adjacent to downtown Seattle, underwent an urban transformation with the development of skyscrapers, fancy restaurants and coffee shops. Although Amazon is the major contributor to the area’s tech rise, Microsoft, Facebook, Google, REI and more also have offices in the same neighborhood.

To see how the Amazon headquarters affected Seattle’s housing market, Zillow economists looked at the Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) data, specifically the LEHD Origin-Destination Employment Statistics (LODES) data set. LODES shows the relationship between where people work and where they live.

By merging Zillow rent data with the LODES data, the group found that rent around the Seattle metro area had increased 17 percent from 2011 to 2015, triggering a supply and demand challenge. This housing shortage was dubbed the “Amazon Effect” in an article by Gene Balk, a columnist at The Seattle Times.

Component ID: #ti536090591

The IPO Effect

Zillow took a similar approach, using LEHD data, to see what happens to housing prices when a tech company goes public, which often creates a wave of instant millionaires.

The study by Zillow economist Jeff Tucker, “Post-IPO, Home Values Grew Faster in Areas Home to Lots of Facebook Employees,” shows the impact of Initial Public Offerings (IPOs) on housing in the San Francisco Bay area.

Tucker identified 1,360 census tracts as home to Facebook employees within four census blocks of the company’s headquarters.

Between March 2012 and 2013, Facebook employees’ home values jumped 21 percent compared to 17 percent in other parts of the Bay Area. According to Tucker’s study, homes appreciated $29,800 in neighborhoods near Facebook headquarters.

Component ID: #ti452625898

More IPOs

Lyft recently went public, and other tech companies including Uber, Airbnb and Pinterest are also on the verge of going public.

Because of that, Zillow decided to look at price elasticity and the California Exodus.

California housing has become so expensive that some data suggest people are moving out of California and moving to adjacent metropolitan areas, such as Dallas, Phoenix and Las Vegas where housing is cheaper.

Zillow researchers looked into worker reallocation (inflows and outflows), using the LEHD Job-to-Job Flows (J2J) data set.

“People moving from one part of the country to another is a very important fundamental concept in real estate economics,” Terrazas said.

By connecting J2J and areas adjacent to the state of California, Zillow could study mortgage affordability — the share of household income that goes to pay the mortgage.

The study found that during last decade’s housing boom in Southern California, home values increased and other areas became even more affordable by comparison. In 2006, Dallas was 46 percent more affordable and Vegas and Phoenix were 25 percent more affordable then Southern California.  

By 2014, as more people moved into these more affordable areas, the affordability gap narrowed: 20 percent more affordable in Dallas and 15 percent more affordable in Las Vegas and Phoenix.

Component ID: #ti649433900

Zillow continues to use the LEHD data to examine the impact of 50,000 new jobs when Amazon opens a second headquarters in northern Virginia. It is also studying housing costs of homes 15 to 30 minutes of downtown metro areas.

Check out this LED Webinar to see how people are using LEHD data.

Component ID: #ti1418583114

 

Earlene K.P. Dowell is a program analyst in the Census Bureau’s Longitudinal Employer-Household Dynamics Program.

 

 

Component ID: #ti1460004299

 

About

America Counts tells the stories behind the numbers in a new inviting way. We feature stories on various topics such as families, housing, employment, business, education, the economy, emergency preparedness, and population. Contact our Public Information Office for media inquiries or interviews.

 

All of Our Content

The entire list of stories is available to you.

Use the hashtag #AmericaCounts to share this story on social media.

 

This story was posted in: Housing


Tags: Housing
X
  Is this page helpful?
Thumbs Up Image Yes    Thumbs Down Image No
X
No, thanks
255 characters remaining
X
Thank you for your feedback.
Comments or suggestions?