The real estate market is entirely reliant on a region’s quality and quantity of jobs. In California, employment varies across the state. Where, then, are the quality jobs being produced?

California jobs are still 300,000 below the pre-recession peak as of April 2022. Without jobs, homebuyers are unable to buy homes and tenants are unable to make rent — a major issue for real estate professionals. Jobs are necessary for household formations, which keep the housing market moving.

California’s per capita income is $76,400 as of 2021, higher than the U.S. average of $54,900, according to the Bureau of Economic Analysis. Thus, jobs tend to pay more in California than elsewhere.

At face value, California’s high per capita income is good news for home prices. However, while California has a higher average income, the pace of income increases falls far behind housing costs.

For example, as of March 2022, U.S. home values increased on average 21% over a year earlier, according to the S&P CoreLogic Case-Shiller Home Price Index. Here in California, the average home price increase was 20% in the low tier, 25% in the mid tier and a whopping 28% in the high tier.

In the Golden State, a reliable, high-paying job is more than a necessity, especially at the incessant rate of home price increases. Throughout the state, there are areas which exhibit high employment — mostly on the coast. Between the dense hot spots of jobs, there are also many areas in the state where employment is spread thinner.

Los Angeles is one of the top five counties in the nation with the highest employment numbers, according to the Federal Reserve Bank of St. Louis. In fact, in 2020, Los Angeles was the largest producer of jobs in the U.S., beating out the ranks of over 3,000 counties.

Compared to the state’s 6.5% annual increase in employment, California’s major metros have seen a rapid return of jobs. Over the past year, employment in California’s most populous counties has increased:

The number of employed individuals is integral to the housing market, but more pressing is the types of employment available. The jobs created need to provide a steady income which allows homebuyers and tenants not only to live, but to have space to prosper. When homebuyers and tenants find the room to grow financially — save up for a down payment — they achieve the ability to upgrade their housing.

Looking ahead at employment in California

The 2020 recession did a number on California’s employment picture. Over two years later, the state is still recovering its lost jobs. But even as California continues to regain jobs lost to the 2020 recession, residents need to prepare for the recession’s encore, expected to arrive in late 2022.

Balance is a key part of a healthy job and housing industry. The only way anyone can reach a balance, or have a dependable place to call home is for employment to continue in growth, and for the cost of living to keep pace with incomes. Thus, real estate professionals can watch their local jobs market for the best indication of the long-term health of the housing market.

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