Master Class

(Illustration: David Cowles for the University of Rochester)

I researched the US housing market at Zillow for 10 years, and since last December I’ve been doing the same for the global labor market at Indeed. We live in incredibly interesting times. It’s fascinating to be able to see the data, analyze what’s going on—and because at both Zillow and Indeed, the research is geared to consumers—provide, I hope, some insights that are helpful to people.

Housing is a fundamental need, and right now the market is, for lack of a better word, nutty. The major trend, persistent for years, is that supply is incredibly tight. So the competition among buyers is fierce. Bidding wars are leading people to go over budget and wave contingencies that ideally they’d want to keep.

In a housing market as tight as what we have, there are going to be some groups at a great disadvantage. Not everyone can take a Thursday afternoon off, look at a bunch of homes, and then say, “Oh, it’s going $200,000 over asking; sure, we can match that.” That makes it very hard for an average buyer to be competitive.

Large demographic shifts are pushing more and more consumers into the housing market. Millennials are becoming homeowners, and Gen Z, also an incredibly large generation, is entering the market.

At the same time, we’ve underbuilt for years. The Great Recession brought a lasting labor shortage in construction. Builders have had a pretty hard time building more, and it really comes down to the L’s: labor is really expensive and in short supply, land is really expensive, and lumber is incredibly expensive.

The result is that often the math only makes sense for the luxury side of the market, where builders are able to get the return they want. That’s true in the rental market as well. Most of the multifamily construction has been luxury units. So there’s been a shortage at the bottom end of the rental market, and appreciation has been incredibly high.

Federal housing policies have usually supported the demand side through assistance, but the problem now is supply, and that’s harder to fix. A huge tool in the chest is at the local level, through zoning. We need to use it more often to make it easier to build—and to make it cheaper to build.

The labor market is just as nutty as housing. We have an extreme imbalance between supply and demand. There are roughly two open jobs for every unemployed person right now. Labor force participation declined sharply during the pandemic, and while it has come up quite a bit, it’s still down from what it was.

I think this is a time of fundamental change in which people are evaluating what they want from their jobs. Through surveys and Indeed data we have found that more so than ever, job seekers are valuing flexibility, which often comes in the form of hybrid or remote jobs.

For people like new college graduates who are entering the job and housing markets at the same time, the situation is mixed. There are more remote offerings for entry-level hires in the most expensive markets. But many of those jobs are also hybrid, which means you’re still expected to show up in the office during some part of the week.

I think remote work will have some interesting side effects in the housing market. For example, I’m a full-time remote worker. I could move to Rochester, where my cost of living would be lower than it is in Seattle. I have coworkers who’ve made those types of moves. Is this just happening on the periphery? Or is there going to be a larger swath of people who can really drive a new trend? I think it’s too soon to tell.