Long-Run Labor Costs of Housing Booms and Busts

We show large flows of workers into the real estate agent occupation (REA) during the early 2000s from virtually all parts of the skill, wage, and education spectrums. We find those entering REA in MSAs with house price bubbles end up in occupations paying significantly less in the long-run as compared to similar REA entrants in non-bubble areas. Even in 2017, when house prices and employment return to their pre-crisis levels, REA entrants in Bubble MSAs are in occupations earning about 6% less. These results point to lasting effects of labor allocation decisions in response to distorted price signals.