How do employment rates affect real estate?

[Stacey Manley]

Hello! My name is Stacey and I am new to BP. My main concern is how you should approach certain areas with relatively high unemployment rates. I want to buy a property near my hometown. However, the unemployment rate there is around 13%. Do you think it would be a bad idea to buy a property in that region?

[Darrell Shepherd]

Watch the trend. I could be 15% and heading down and be a smart play, or it could be 5%, but three factories are about to close and you'll get killed when everybody leaves.

Jobs definitely drive prices, but if 13% is normal and housing is stabilized, you can be fine investing there. When I was looking at apartments one of the biggest factors we looked at for appreciation potential was job growth in the area.

At the end of the day values are based on supply and demand, so the unemployment 'rate' isn't as important as housing supply and trends IMO. Same pretty much goes for rent rates. Are people moving into or out of the area? Is there downward pressure on rental rates (lots of empties)? etc.