Mortgage Blog

Real Estate Markets in Tech Hubs?

March 15th, 2019 9:45 PM by Eric Fang

Dozens of factors go into play in the housing market. The stock market dips, and home prices change. A factory opens or closes and sends homeowners into a frenzy. While mortgage experts can track a few obvious factors over time, there are also more subtle trends that affect housing. Modern startup culture is one of these.

Most people associate startups with Silicon Valley. The home of Google and Facebook is also where thousands of other startups thrive. However, the demand to live there has made housing in San Francisco and the surrounding areas almost impossibly expensive. Housing prices in San Francisco are 76 percent higher than five years ago, but even well-paying tech jobs only pay 20 percent more than the average. Both startup employees and regular non-tech workers struggle to live in the city.

These exorbitant costs are driving startup founders to explore other markets. Parts of the Midwest are now known as the Silicon Prairie, with towns like Lincoln, Nebraska, leading the way as a hub for tech workers. In the South, Birmingham, Alabama, has risen up as a tech hub, recruiting graduates from across the state.

Unlike traditional industries, most startups are only reliant on talent to operate. Unlike the logging or oil industries, which are based on where trees grow and crude oil is found, these "startup hubs" just need to recruit the best and brightest who have great ideas and sufficient funding to start a company. When college graduates with a tech focus don't want to live in tiny apartments in California or New York, they turn to other options closer to home.

When a city is perceived as a "tech hub," its housing situation changes dramatically. More people continue to move to the area, increasing the demand for homes. These jobs are predominately white collar, upper-middle class, and attractive to young workers who may be looking to buy their first homes.

In 2018, Mobile and Birmingham, Alabama, had some of the highest year-over-year home costs, with Mobile's home prices increasing 21 percent and Birmingham's increasing 7.1 percent. Similarly, home prices in Lincoln, Nebraska, are up 10 percent year over year.

Startup culture doesn't just affect Silicon Valley. The changes made in California have had impacts all across the country and in unsuspecting industries. The home builders in Birmingham and Lincoln can attest to that.

Posted in:General

Posted by Eric Fang on March 15th, 2019 9:45 PM

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