Redfin previously published data indicating that for every 1% increase in tech workers in various cities, home prices rose by an average of 0.49%. Although this data was published nearly a decade ago and may need updating, the core premise remains relevant: when an area experiences significant growth in tech jobs, property values tend to rise.
Why does this occur? After analyzing market data from CoStar, I found a strong correlation between increases in household income and office employment (which includes tech roles) and the growth in housing prices.
The correlation coefficient measures the strength of the relationship between two variables, and the closer it is to 1, the stronger the connection. Based on this data, real estate prices in major metropolitan areas show a strong relationship with household income, office employment, and overall employment.
Top 10 Cities with the Highest Tech Job Growth
I used historical data from the Bureau of Labor Statistics (BLS) to identify job growth within the Computer and Mathematical Operations category, representing tech jobs. To determine the top 10 markets, I applied the following criteria:
Markets in the top 50% for total tech jobs, excluding smaller markets.
Markets with a higher proportion of tech jobs relative to their size, compared to the national average.
Positive overall employment growth, excluding markets with declining total employment despite tech job growth.
While some cities like Austin, Texas, Provo, Utah, and Salt Lake City, Utah saw significant growth from 2018 to 2023, their year-over-year growth between 2022 and 2023 was stagnant or negative. This indicates that their most substantial tech job growth occurred before 2022, likely influenced by the pandemic.
Other cities with strong five-year compound growth are continuing to experience high one-year growth, according to recent BLS data.
Location Quotient (LQ) and Tech Growth Cities
When calculating the top 10 cities, I factored in the Location Quotient (LQ), which measures the concentration of a particular industry in a city compared to the national average. According to the BLS, an LQ greater than 1 indicates that the industry comprises a larger share of local employment compared to the national average. For tech job rankings, I included only cities with an LQ above 1, ensuring they have a proportion of tech jobs higher than the national average.
Top 10 Cities for STEM Job Growth
To expand the analysis, I examined job growth in STEM fields, specifically Computer and Mathematical Operations, Architecture and Engineering, and Life, Physical, and Social Science occupations. I analyzed growth in these fields for each metro area from 2018 to 2023.
While some cities demonstrated impressive five-year compound growth, others experienced declines over the past year, such as Nashville, Lexington, and Lakeland. However, metros like Los Angeles, Raleigh, and Oklahoma City have seen significant one-year growth, suggesting they are rebounding from earlier declines.
Final Thoughts
A rise in tech employment generally leads to higher wages, which drives real estate price growth over time. Investing in areas with strong STEM employment growth could be a viable strategy, capitalizing on property value appreciation. Markets such as Ogden, Sacramento, and the Research Triangle in North Carolina (Raleigh-Durham-Chapel Hill) should remain on your radar for potential real estate investment, given their continued tech sector expansion and promising future.
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