Over the course of the past couple of years, we’ve gotten used to a new normal — and a large part of that pandemic lifestyle (one that seems likely to stay) is the shift toward remote work. But while we were all rearranging our dining rooms into makeshift offices and learning how to navigate issues over Zoom with colleagues, there’s been another major change that remote work just might be responsible for: the housing market. It’s been a seller’s market for a long time, causing headaches for would-be buyers in search of that perfect home. Now, new research indicates that remote work accounts for more than half of the increases in housing prices we’ve seen since the pandemic began.
According to a National Bureau of Economic Research working paper, written by researchers from the Federal Reserve Bank of San Francisco and the University of California, San Diego, national house prices have increased 23.8% since late 2019, which is the fastest growth rate on record.
Researchers also noted that 42.8% of employees were still working from home as of November 2021 with evidence that a significant portion of remote work will remain permanent. With people less tied to their current locations for work, they have more opportunities to move further from home without completely uprooting every aspect of their life.
According to the working paper, the shift to remote work is responsible for 15.1% of the nearly 24% increase in housing prices nationally. (NBER working papers have not been peer-reviewed or been subject to review by the NBER Board of Directors, but they are circulated for discussion and comments.)
Johannes Wieland, an associate professor of economics at the University of California, San Diego, and co-author of the study, told CNN:
“We were pretty shocked remote work had this impact, once we saw the estimates. We thought about how people moving to different locations would be important. And it is. But it is the people who are remaining in a metro area — the people who need more space at home if they work at home — that is really pushing up prices. That is the majority of the story.”
While the people remaining in a metro area make up a large part of the story, the working paper did indicate there are ideal locations for remote work. Researchers identified three main reasons why a city or region would attract remote workers:
- The area is known for remote-work-friendly industries like tech
- The area has a lower population density
- The area offers a warmer climate or appealing lifestyle
Other studies have shown that even with the switch to remote work, the majority of potential homebuyers aren’t looking to switch coasts; instead, they’re looking closer to home. This is consistent with Wieland’s observations — and with the fact that the vast majority of home renovation projects right now are about creating more livable space at home. If our homes are also our offices, we need space to live, work, and play.
Researchers found that “the evolution of remote work is likely to have large effects on the future path of house prices and inflation.”
The shift doesn’t reflect a speculative bubble; the study says the lower interest rates and fiscal stimulus of the pandemic didn’t play a large role in the increase in house prices.
Researchers wrote, “If remote work reverses, then there may be a general reversal in housing demand and potentially house prices. If remote work persists, we may expect important repercussions as increased housing costs feed into inflation and so affect the response of monetary policy.”
Working from home has become a way of life for many of us — and research indicates that it just might play a role in the housing market for years to come.
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