House Hunters: Yes on Sprawl, No on Jobs. Huh?

If you're making a big move and looking at markets across the country, don't ignore the job market. Unless you're retired, buying an investment property, or are expecting to live off your Facebook shares, remember that markets with great housing deals tend to have higher unemployment.
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Every three months or so, we take a close look at the home searches on Trulia: where are the searchers, and where are the homes they're looking at? This time around we're taking a close look at why people search where they do, and we've uncovered these two facts:

---- Most short-distance searches (under 100 miles away) are toward the suburbs or smaller cities.

---- Long-distance searches (more than 500 miles away) are toward more affordable markets with worse job prospects.

People want sprawl and don't care about jobs? Of course, it's not quite that simple -- but there's more than a grain of truth in that statement. Let's start with the short-distance searches and move to the long-distance searches.

Staying Close, But In Need Of More Elbow Room
Over the past year (April 2011-March 2012), 44% of all the searches on Trulia were within a metro area, and 56% were to another metro area (not including searches from outside the U.S.). Of these "cross-metro" searches, roughly one-third were "short-distance" (less than 100 miles away), one-third were "middle-distance" (100 to 500 miles away), and one-third were "long-distance (more than 500 miles away). The top 10 searches were all short-distance searches, with more people looking from Los Angeles to Riverside-San Bernardino than between any other pair of metros. Of these 10, seven are from bigger to smaller metros (e.g., Dallas to Fort Worth) or from a dense urban metro to its suburbs (e.g., New York to Long Island). Here's the list.

Note: all of these top 10 searches overall happen to be short-distance searches.

Neighboring metros share many of the same features: they tend to have the same weather, for instance. But nearby metros can differ a lot in other ways. House hunters searching within 100 miles are twice as likely to look at more suburban or smaller markets, where neighborhoods typically consist of single-family homes with yards, than at more urban or larger markets where homes are smaller and more likely to be apartments or condos (measured by density). Suburban and smaller-city markets also tend to have had bigger price drops during the housing crash and lower-cost housing now. However, these places still attract more home searches even when they are just as expensive as nearby urban markets. More than twice as many searches are from crowded Los Angeles to suburban Ventura County than in the reverse direction, even though homes are just as expensive and the housing bust was similarly severe; same with Boston and Cape Cod, and New York and Fairfield County, CT.

Clearly, house hunters face a dilemma. On the one hand, people tell us they want the benefits of city living: nearby shops and restaurants, public transit and a shorter commute. But when it comes to searching for homes, they're more likely to sacrifice these amenities in favor of more space. That's not just because people love sprawl: many government policies, like interstate highway investments and strict regulations on urban development, encourage faster growth in lower-density areas. When people look from dense cities to sprawling suburbs, it's partly because that's where the homes are available at the price they can afford. In the future, people could start looking more toward big cities if baby boomers want to leave the suburbs; if rising gas prices make commuting from the suburbs too expensive; or if government policies become less biased against cities. But for now, people still have their eye on the 'burbs.

The top middle-distance searches (table 2) include lots of rival city pairs: Dallas and Houston, Washington, D.C., and New York, and so on. Eight out of the top 10 middle-distance searches are in the Sunbelt states -- nine if you count Oklahoma. What explains these middle-distance searches? Lower density is still the main draw, as well bigger price declines.

Note: "middle-distance" searches are 100-to-500 miles away.

Going the Distance for Bargains and Warm Winters, But Not Jobs
Long-distance searches are where the really interesting story lies. These searches for homes 500 miles or more away account for 20% of all searches on our site. Of these long-distance searches, 54% are toward the west and 62% are toward the south, thanks in part to all those New Yorkers looking at homes in Florida (table 3). Los Angeles to New York is the only eastbound or northbound search on the list. The top long-distance searches look really different from the top short- and middle-distance searches -- and it turns out that people searching for a home near where they currently live are looking for something very different than people looking to move far, far away.

Note: "long-distance" searches are more than 500 miles away.

A long-distance search is very different from a short-distance search: if you're open to moving anywhere in the US, you've got a huge diversity of places to choose from: sunny, snowy, mountainous, coastal, booming, affordable, old, new and so on.

Affordability matters a lot for long-distance searchers, who are 1.7 times more likely to look for homes in markets with bigger price drops in the bust, relative to where they live now, than in markets that held up better. They're also 1.4 times more likely to look for homes in markets with a lower price-per-square-foot, relative to where they live now, than in more expensive markets. Long-distance searchers also factor in weather: people are 1.8 times more likely to look for homes in markets with warmer winters than in markets with colder winters, relative to where they live now. Density matters less for long-distance searchers - most people don't need to move across the country just to find more space.

Here's the surprise. You'd think that people would search where jobs are plentiful, but you'd be wrong. Most long-distance searchers look for homes in markets with higher unemployment and slower job growth than where they live now. For instance, seven times as many people in Washington, D.C., (5.9 percent unemployment) looked for homes in Orlando (10.3 percent unemployment) than in the reverse direction. Here are other searches where twice as many people searched from the lower-unemployment market to the higher-unemployment market than in the reverse direction:

Note: listed in alphabetical order of destination metro. Each pair has at least twice as many searches toward the destination metro than in the reverse direction, and the destination metro has an unemployment rate at least two points higher than the origin metro. Unemployment rate is averaged over 2011 plus first two months of 2012.

People aren't masochists: they're not looking to move in order to be unemployed. Rather, they are looking primarily for affordable, warm locations, and those locations happen to have much higher unemployment rates than other markets do. The relationship between affordability-as measured by home price declines during the bust-and unemployment is especially strong: markets like Las Vegas and Bakersfield may have great bargains, but those price drops went hand-in-hand with job losses and high unemployment. The scatterplot below shows how strong this relationship is: the bigger the price drop, the higher the unemployment rate. The orange dots are metros where more people are looking to move in than out (more inbound than outbound searches), like Las Vegas and Riverside-San Bernardino. The green dots are metros where more people are looking to move out than in (more outbound than inbound searches), like Washington, D.C., and Louisville. As a general rule, metros with more inbound searches had bigger price drops and have higher unemployment than those with more outbound searches.

Not every search, of course, is by someone who is about to move and will need a job. Retirees, investors and people just looking for fun might not care about the unemployment rate in markets where they're searching for homes. But the rest of us probably need a job wherever we're moving. The graph shows that few metros have bargains (big price drops) AND a low unemployment rate. In other words, the lower-left corner of the chart is pretty empty, except for Honolulu -- which really isn't a bargain since it is still very expensive even after prices dropped by more than half. Phoenix, Tucson and Fort Lauderdale almost fit the bill: they saw big price drops yet unemployment remains lower than other metros where prices plummeted. Among metros with relatively low unemployment rates, Oklahoma City and Austin had the biggest price drops.

Bottom line: If you're making a big move and looking at markets across the country, don't ignore the job market. Unless you're retired, buying an investment property, or are expecting to live off your Facebook shares, remember that markets with great housing deals tend to have higher unemployment. If you still have to work for a living, you should know what the job market looks like before you plan your next move.

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