By: Guest Author, Virginia REALTORS® Chief Economist, Lisa Sturtevant, PhD
What do Arlington, Danville, and Midlothian have in common? Each community in the Commonwealth has announced the location of a new, major employer. While one announcement may have gotten more attention than others, the locating of a new business in a community can have a major impact.
In late 2018, the Governor of Virginia announced that PRA Group would be bringing 500 jobs to Danville. This investment represents a major boost to Danville’s local economy. Over the past 10 years, Danville has lost an average of 138 jobs annually. Therefore, the 500 new jobs are an important driver in the turnaround in the City’s employment numbers.
In March 2019, the Results Companies announced they would be investing $1.5 million to expand their client engagement operations in Chesterfield County. The 600 new jobs in Midlothian add to the more than 1,300 jobs the company currently has in Virginia.
And, of course, Amazon announced in November 2018 that it was locating its second headquarters in the Crystal City neighborhood of Arlington County.
When a new business decides to locate in Virginia, the state and county or city are quick to promote the benefits to the community. New jobs mean a diversified and expanded tax base. More jobs can mean more opportunities for local residents. A headquarters company locating to Virginia can bring additional prestige to the Commonwealth.
There can also be important impacts on the local housing market when a new company locates or significantly expands. In order to understand how new jobs in the community will impact the housing market, it is important to examine the characteristics of new jobs, as well as the underlying condition of the local economy and housing market.
How will a new business affect the housing market? How should buyers and sellers set their expectations? There are several questions to ask when attempting to gauge how big an impact there might be.
- How many new jobs will be added, and how many of those new jobs will be filled by new residents? The first step is to understand exactly how many new jobs the company is bringing to the community. It is also important to think about who might fill the jobs—existing residents or newcomers. New residents mean greater demands for housing.
- What kinds of jobs are being added and what are the characteristics of workers filling those jobs? Not all new jobs are created equal when it comes to the likely impact on the housing market, and on the for-sale market, in particular. When it comes to assessing market impact, the most important job characteristic is the wages associated with new jobs.
- What types of housing will new workers want to live in? The ages of workers, their household composition (i.e. single, married couple with children, etc.) and the incomes of new households are all strongly associated with the likelihood of being a homeowner and the type of home desired.
- Where will new workers live? Understanding the potential commuting patterns of new workers is also valuable for evaluating potential housing market impacts in different neighborhoods.
When there is a new announcement of a new company locating to the area, answers to these questions will help guide conclusions about whether the impact on the local housing market will be significant (i.e. dramatic impact on home sales and prices), targeted (i.e. isolated impacts in specific neighborhoods or product types) or marginal (i.e. little impact on the market). This type of information will also help when having conversations with potential buyers and sellers about their expectations.