Recovery in property price growth in the US is slower in rural areas

Home value growth has largely followed job creation since the recession in the United States, further concentrating the housing market to large cities with rural areas lagging behind in terms of recovery.

Some 35.1% of employment growth and 40.7% of home value growth since July 2009 have come from the 10 largest job markets in the country, according to new research from real estate firm Zillow.

It also reveals that both home value and job growth have been much slower in rural areas than during the previous economic expansion in the early 2000s.

While housing inventory rose modestly in July, the market has been characterized by persistently low numbers of homes for sale over the past few years, exacerbating affordability challenges for prospective buyers in many large markets that have experienced strong job growth during the recovery, it points out.

It explains that a combination of concentrated job growth and inventory shortfalls created an environment for dramatic home value appreciation, concentrating home equity accumulation to large markets to an even greater extreme than concentrated job growth alone.

The analysis report also says that rising home values, and a corresponding rise in what’s needed for a down payment, are a main reason home ownership rates are lower for young people during the economic expansion than those who reached the same age during or immediately after the recession.

‘The striking difference between the two periods of recent economic expansion is the contrast between more balanced growth across the U.S. in the early 2000s, to a fairly consistent pattern of rural and small markets being left behind as jobs and home value growth concentrate in large markets,’ said Skylar Olsen, director of economic research at Zillow.

‘The jobs story is one of continuing struggles in rural and small markets where manufacturing and agriculture are concentrated. But large cities are seeing another side of the problem in home value growth. It’s not only about job vitality but also a city’s ability to increase the amount of housing to meet that influx of workers. Job concentration increasingly means that already expensive metros are becoming even more expensive at a faster rate than before,’ Olsen added.

Growth has been strongest in second-tier markets, ranging from Seattle, the eleventh largest US job market to Pittsburgh, the 25th largest. These metros as a whole have outpaced the national average employment growth by 4% and the average home value growth by 7.6%.

The figures show that much of this can be attributed to strong growth in a cluster of western areas in this group with Denver at 33.5%, Riverside at 30.2%, Seattle at 24.5%, San Diego at 19.2%, Phoenix at 13.9% and Portland at 10.1%. They have each outperformed the national housing market by double digits. Baltimore with a fall of 35.2% and St. Louis with a fall of 25.3% have greatly underperformed compared to the national average.

Housing in the next tier of job markets, ranging from San Jose, the 26th largest, to Rochester, the 50th largest, has also performed well, beating the national average home value growth by 6.1%. However, nearly all of this can be attributed to extreme growth in San Jose, which has outpaced the national housing market by 81.6%.

Previous Zillow research has shown that California alone has accounted for nearly one-third of the value gained during this housing recovery.