Home prices rose 24% between November 2019 and November 2021, the study revealed on Monday. The increased demand for working from home accounted for more than 60% of the total price increases and similar rent increases during this period.
Economists August Kmetz and John Mondragon of the San Francisco Fed and Johannes Wieland, an economist and associate professor at the University of California, San Diego, found that remote-able workers “could move to cities with cheaper housing or more attractive amenities” because the Offices are closed to contain the spread of Covid-19.
These cities saw the largest increases in housing costs, while regions “less accessible” to remote work saw slower home price growth. Some of the cities that have proven to be remote work hotspots during the pandemic are Charleston, South Carolina; Orlando Fla.; and Wilmington, Delaware, respectively LinkedIn.
The researchers compared regions in the US that experienced similar migration volumes but different levels of remote workers during the pandemic, as well as areas with different levels of migration but similar levels of remote workers, to isolate the impact of remote work on housing demand and the impact of pandemic-related Migration.
For example: Remote work increased in both the San Francisco Bay Area and Tampa, Florida during the pandemic, but the Bay Area experienced a pandemic exodus during Tampa’s population explodes. But apartments in both regions have become more expensive during the pandemic, says Wieland CNBC does it.
That’s because telecommuters had similar demand for a new home in both regions, as the ability to work from home allowed people to move farther from the office and motivated them to buy larger homes to accommodate their new lifestyle, adds Wieland.
Even after accounting for this migration, most of the impact of remote work on home prices remains: every 1 percentage point increase in remote work caused an increase in home prices of about 0.9 percentage point. The researchers also found that the rise in remote work had an “identical” effect on him rental rateswhich have reached record highs in the US
“Our results suggest that rising house prices during the pandemic reflected a shift in fundamentals rather than a speculative bubble,” the authors wrote. “This implies that the development of remote work could be an important determinant of future housing costs and inflation.”
Even if the housing market is cooling down, it’s still hot, thanks, partially, to housing shortages, persistent inflation and economic uncertainty. Earlier this week, the average 30-year-old in the US was determined mortgage rates reached 6.87%, the highest rate since 2002, and rental rates continue to rise in US cities
US Federal Reserve Chairman Jerome Powell told reporters last week that the housing market needed a “difficult correction” to make homes affordable for more Americans.
“There was a big imbalance … house prices rose to unsustainably fast levels,” Powell said. “In the long run, supply and demand need to be better matched so that house prices rise at a reasonable level and at a reasonable pace and people can afford houses again.”