Zillow: Job Growth Could Reverse Midwest Migration

Here’s something you haven’t heard for a while: the nation’s Midwest region could soon become a housing hotspot.

Zillow Inc., Seattle, said as businesses look for cheaper places to expand, job growth in the middle of the country can again begin attracting more residents, reversing a trend over the past decade that saw population growth surge toward coastal regions.

The company’s quarterly Home Price Expectations Survey of analysts said more than half of those surveyed believe migration to coasts to continue indefinitely, pointing to job expansion and high housing costs on the coasts to drive residents inland.

“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 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.”

Recovery from the housing boom and bust has looked very different for Middle America and coastal America, Zillow said. While markets on the East and West coasts experienced rapidly rising home values and strong job markets, markets in the Rust Belt and Midwest moved more slowly; negative equity is still prevalent; and job growth has been minimal.

Of reasons predicting people would move back to the middle of the country, respondents said job growth was most popular. Just over 20 percent said people would migrate inland in search of more affordable housing, while 13 percent said Americans will start to seek the “traditional lifestyle” that the middle of the country has to offer. Two percent said climate change will force residents away from the coasts.

Analysts currently expect U.S. home values to finish 2016 with a healthy 4.5 percent year-over-year gain, said Terry Loebs, founder of Pulsenomics, which conducted the survey. “This projection implies a somewhat cooler, but still solid, second half of the year,” he said. “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.”