May 31, 2022
Remote Work Has Pushed Up House Prices
Slack, Citizens Bank, Penguin Random House, Verizon, 3M, Twitter – the list is long and growing of companies that have allowed employees to continue working remotely even though the pandemic seems to be easing.
The COVID-19 upheaval in lifestyles – the moving around to larger homes, to the countryside or to an affordable city – is pushing up house prices.
John Mondragon at the Federal Reserve Bank of San Francisco and Johannes Wieland at the University of California, San Diego, estimate that remote work fueled a 15 percent rise in house prices over the two-year period that ended in November 2021. That’s more than half of the total price increase for that period, which was a record, the researchers said.
A few different types of lifestyle changes drove the price hikes. But the bottom line is that remote work caused a frenzy of buying activity that wouldn’t have happened otherwise. The increase in demand sparked competitive bidding for properties – and prices shot up. And the parts of the country where remote work was more common had significantly larger price increases.
The price increases “reflected a change in fundamentals rather than a speculative bubble,” the researchers concluded.
Soon after the pandemic began, workers who were changing their living arrangements made the news. Renters left behind expensive apartments in New York or San Francisco to escape COVID’s dangers. Now working remotely, they used their newfound freedom to become first-time homeowners in an appealing suburb nearby or a rural area halfway across the country where they could afford to buy a house.
The need for larger homes also heated up market activity. Having more space was suddenly more valued by workers who required an additional bedroom to set up a home office or now had to accommodate both spouses working from home – and, early in the pandemic, children attending classes on Zoom.
The researchers stress that they measured only the price increases resulting from an increase in aggregate housing demand nationwide. In other words, people didn’t add to total demand if they simply moved from Chicago, where they sold a condominium, to Des Moines, Iowa, where they purchased a house of similar value.
“Moving from one place to another simply shifts housing demand,” Wieland explained in an email. “It is only the increase in aggregate demand for home space that raises house prices nationwide.”
The researchers wouldn’t predict what happens next. It depends on whether remote work in some form is here to stay or the trend reverses and companies call their workers back to the office. But it will be an important trend to watch.
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