We estimate the effects of house price changes on young-firm employment shares and industry-level employment growth in local economies. A novel test shows that house price effects on local economies work through wealth, liquidity, and collateral effects on the propensity to start new firms and expand young ones. Aggregating local effects to the national level, our estimates imply that housing market ups and downs play a major role—as transmission channel and driving force—in medium-run fluctuations in young-firm employment shares in recent decades. We also find a distinct and smaller role for locally exogenous loan-supply shifts.