IRVINE, CA—As Amazon has whittled down more than 200 contenders for its second headquarters campus to a shortlist of 20 cities, the issue has arisen once more of what the e-commerce behemoth's presence in a given metro area would do to that market's housing costs. “No matter which city is chosen, the influx of 50,000 high-paid Amazon workers and 66,250 supplementary workers over a 10-year period will put pressure on local housing markets, driving up rent and home prices,” says Apartment List.

Although the impact would vary among individual metro areas, analyses by CoreLogic and Apartment List point to two general conclusions. Namely, markets where for-sale housing prices are already overheated would feel the Amazon effect most acutely, while on the rental side, the smaller markets are especially susceptible.

As it is, “overheated” is an adjective that CoreLogic would use to describe housing prices in 11 of the 20 metro areas that Amazon has shortlisted. The more technical term would be “overvalued,” which CoreLogic uses to characterize a market in which home prices are at least 10% higher than the long-term, sustainable level.

One market that meets the at-risk criteria of both CoreLogic and Apartment List is Nashville, where for-sale housing prices rose 8.17% on a year-over-year basis and which also ranks fifth in Apartment List's ranking of metro areas that would see the biggest impact on rent growth. Over a 10-year period, renters in the Music City could end up paying as much as $11,932 more if Amazon chose to build its HQ2 project there.

“All metros studied will experience additional rent growth from the Amazon HQ2, but to differing extents, with smaller metros generally experiencing greater rent growth,” according to Apartment List. “We project that Raleigh, NC; Columbus, OH; Indianapolis; Pittsburgh; and Nashville will feel the rent increase the most, with additional annual rent growth between 1.2% and 2.0%. The impact will be smaller in metros with large housing stocks such as Washington, DC, Los Angeles, Dallas and New York, with additional annual rent growth projected at or below 0.5% a year.”

Conversely, while Apartment List positions Raleigh at the top of its ranking in terms of the impact on rental pricing, CoreLogic characterizes for-sale prices in this North Carolina City as “normal,” meaning the impact would be felt less keenly in that housing sector. Also rated as “normal” are for-sale housing prices in Atlanta, Boston, Chicago, Columbus, Newark and Philadelphia.

Joining Nashville on CoreLogic's “overvalued” list are Austin, Dallas, Denver, Los Angeles, Miami, Montgomery County in Maryland, New York City, Northern Virginia and Washington, DC. Only Indianapolis and Pittsburgh are considered undervalued; neither CoreLogic nor Apartment List monitor housing prices in the sole Canadian market on Amazon's shortlist, Toronto. Additionally, Apartment List's analysis did not break out the Maryland and Virginia suburbs of DC or list Newark as a separate market from the New York metro area.

“As leaders at Amazon continue to narrow their location choices, the housing situation is an important consideration,” says Frank Nothaft, chief economist for CoreLogic. “Some of the contenders have home price increases that are trending higher than the national average of 6%. Denver and Nashville lead the pack with home price increases at more than 8%, but CoreLogic research indicates that these markets are overvalued right now. Adding a job creator like Amazon would add further housing demand and upward pressure to housing costs.”

Instant Insights /

The 'Amazon Effect' on Residential Pricing

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