Lima, Ohio; A Proud Part of the Ford Motor Company Family
The Ford Motor Company announced the addition of up to 300 jobs at our local Ford Engine Plant in Lima, Ohio. They have decided to add another line of engines to the production of the already prolific plant. With and investment of $500 million, Ford has dusted off over 700,000 square feet of the Lima facility that have not been utilized in many years and plan to produce next generation Eco-Boost engines that actually completely shut-off during idle to further conserve energy. We who live in Lima have been proud of the production of Ford engines in our town since it began with Edsel engines (the opposite of energy friendly) in 1957. Many families in the area are now multi-generational United Auto Workers who are either currently employed or are retired from Ford. This announcement is great news for the housing market in the area.
Prior to the addition of this new engine line, the local Ford plant employs just over 900 total people. From hourly line workers to salaried office staff, there are over $38,000,000 of incomes flowing into the local economy yearly. This income, because it has been in place for a number of years, does not affect the local housing economy in extraordinary way as these persons have participate in the buying and selling of real estate on a limited basis. The addition of another $13 million in incomes to the area to people who have not yet participated in the real estate market could mean great things for local home prices.
Incomes Do Affect the Housing Market
In a famous housing modeling study done in 1994 by DiPasquale and Wheaton, which tends to work well for smaller, midwestern towns, they showed how demand and pricing for single family homes is directly a function of the factors of the following: total number of single family dwellings, total number of households, age-expected ownership, cost of renting versus owning, and average household income in a specific market. I shall explain further about the uses of this study and its various components in another article, but for now, note that household income does directly correlate to both demand and pricing of homes in a particular market.
With expected average incomes of over $43,000 per year, these employees, as single person households, can afford to purchase real estate with market values of $138,000 or so. This increase in average incomes in the area alone could increase the average home price from the 2013 average of $135,194 if each of the new employees buys a home just for themselves. This alone represents a 2% market value increase just from the increased incomes in the area. But simple common sense tells us that this will not happen for two reasons. First, most of the new workers will come from the immediate are and will not be participating in the housing market because they already live here. Secondly, this assumes that each household that participates in the purchase of a home would be limited to this single income and we all understand that in today's world, single income families are rare.
What Will Happen to The Local Housing Market?
The Greater Lima, Ohio area currently maintains a 6% unemployment rate. The addition of 300 jobs will help reduce this to a very limited extent. The Ford Motor Company and the United Auto Workers will first fill job openings with those members and former employees that have been displaced in other local associated businesses. The remainder of the jobs will be filled with qualified local applicants. There will not be a great influx of new residents to the area because of this wonderful news, which really bursts that dream bubble for home sellers, but is great news for everything else. Increased overall average incomes, lowered unemployment rates, long-term commitments to the area by large corporations, increased tax incomes, and much more are all going to someday come together to further increase the average home values in the area.
I have touched on about a million possible discussions of how the local economy affects housing markets and didn't really get into depth on any one issue. If you would like to deepen a discussion please contact me through your comments here, or call or text me.