Many times we hear that jobs are the key to everything, at least as far as the economy is concerned. And that is certainly something we hear about in the real estate world – job growth increases housing demand. But are jobs the biggest driver of residential real estate demand?
Not the case, according to our trusted friends at the Cromford Report. The leading factor in housing demand is population. It’s true that job growth can induce population growth, especially as people move to a new area or city specifically for a job. But the opposite is also true – people will move out of an area or city when they no longer have or need a job.
In Arizona, we have lost many undocumented workers since 2008, and Mike Orr of the Cromford Report suggests that we have experienced net migration from Arizona to Mexico since that time, not the other way around. This is due to the booming Mexican economy, and the fact that the construction industry took a nose dive in 2008.
However, our population has increased during this time, not decreased, as an increase in retirees and second home buyers have more than compensated for the loss in population to Mexico. These people have been moving here to enjoy Arizona’s climate and the lifestyle that goes with it. They have not moved here for jobs.
So how does population affect real estate? Simply put, if the population declines, the need for housing declines. And as population starts to decline, i.e. more deaths than births, we could see home prices start to go into a long term decline. There are clear examples of this in cities across the country. It’s important to note that population declines cause a long term shift in housing demand, not an immediate or short term shift.
While job growth in the Phoenix area has certainly boosted housing demand, population growth has been the biggest driver.
As Scottsdale Realtors specializing in Arizona golf communities, we keep up to date on demographic and economic factors that affect our real estate market. If you are looking to buy or sell a home in the Scottsdale/Phoenix area, contact us by calling 480-405-4228 or fill out the form below.
Realtor | Founder
The Matheson Team – RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255