Written by Mark Fleming, First American's Chief Economist
Amazon’s very public search to identify the best location for its second headquarters made me wonder - what criteria would be helpful for young professionals when making their personal decision on where to live and work? Affordable housing would be important. For example, you can buy so much more home in Texas or Ohio than you can in California. But, when making the decision about where to live, considering what and how many job opportunities exist is also a critical point. The most attractive places to live for young professionals would be where housing costs are reasonable and great job opportunities are abundant. In other words, the top cities for economic opportunity.
Our Economic Opportunity Index ranks cities by both their economic prospects and housing affordability, providing a way to identify the places where job opportunities are high and homeownership is more attainable. To determine the economic prospects of a market, the index measures recent growth in America’s advanced industry sectors, the top 50 R&D and STEM worker-intensive industries as defined by Brookings’s analysis of Moody’s Analytics data. The higher the growth rate of advanced industry jobs, the greater the economic prospects for young professionals in that market. In the figure below, the size of the bubble is the total number of advanced industry jobs in 2015. To measure housing affordability, we used our Real House Price Index (RHPI), which tracks the affordability of homes after accounting for income levels and interest rates. The lower the RHPI value, the more affordable the market.
“The most attractive places to live for young professionals would be where housing costs are reasonable and great job opportunities are abundant. In other words, the top cities for economic opportunity.”
In the figure, cities in the lower left corner feature expensive housing and have low advanced industry job growth and, therefore, the economic prospects for young professionals living in these cities is lower. Cities in the upper right are where housing is more affordable and advanced industry job growth is high. These are cities with greater economic prospects for young professionals. The size of the bubble measures the total number of advanced industry jobs in the market in 2015, and the markets are colored by our final ranking of Economic Opportunity. The bluer the bubble, the higher the rank.
It’s no surprise that San Francisco is one of the cities with the largest and fastest growing advanced industry employment, but housing is relatively unaffordable. Conversely, Cincinnati housing is affordable, but it lacks a large or growing number of advanced industry employers. Seattle, the location of Amazon’s current headquarters, is in the middle of the pack in terms of our housing affordability measure, but the pace of advanced job growth is quite low.
Tennessee and North Carolina are home to four of the top five cities in our Economic Opportunity Index:
- Memphis, Tenn.
- Charlotte, N.C.
- Raleigh, N.C.
- Nashville, Tenn.
- Kansas City, Mo.
All of these cities feature affordable housing markets and strong advanced industry job growth, so perhaps they will make Amazon’s shortlist for its second headquarters. After all, they are all cities where advanced industry job opportunities are high and young professionals can still afford to buy homes.
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