Remote Work Is Driving Housing Demand and Making Homes More Expensive
- An uptick in remote work is driving US home prices higher, a new NBER study found.
- It’s because employees can now choose where they work — and it’s fueling homebuyer migration.
- The research suggests Miami and Phoenix are the top destinations for migrating homebuyers.
The widespread shift to remote work has not only changed how Americans get work done, but also where they choose to do it – and it’s making the housing market more expensive.
A study from the National Bureau of Economic Research analyzed remote work data from December 2019 to November 2021, and found that by the end of the period 42.8% of American employees were still working from home part or full time. It also found some evidence pointing to a significant share of current remote work becoming permanent.
NBER’s working paper suggests at the same time, US house prices grew by 23.8% – the fastest rate on record — as remote work fueled both housing demand and homebuyer migration, which ultimately led to an increase in home prices and rents.
“House price growth over the pandemic reflected a change in fundamentals rather than a speculative bubble,” researchers wrote.
As more US employees are given the option to work remotely, it’s no surprise they’re packing up their bags and moving to the most-desired towns and neighborhoods. Afterall, the American dream of homeownership becomes more appealing when it doesn’t hinge on your proximity to a nine to five.
“The accelerated rise of remote work throughout the pandemic has been a driving force behind the uptick in homebuyer migration we have been tracking over the last two years,” Taylor Marr, Redfin deputy chief economist, told Insider.
However, the growth in remote work is making the already unaffordable housing market even more pricey, especially as housing inventory continues to fall short of buyer demand.
The pandemic has challenged attitudes of the traditional work model. Employers are realizing that workers are capable of thriving outside of an office. As more businesses shift to either a fully remote or hybrid model, it’s encouraging employees to reassess where they get their work done. For many Americans, that means seeking out a home that better fits their needs. However, whether these workers choose to move across the street or the country – it’s driving home prices higher.
“Many of these relocating households bring bigger budgets than locals and recent research from NBER has found that over half of the increase in house prices since 2019 is due to remote work,” Marr said.
According to Redfin, as home prices climb across the country, a surplus of remote workers are relocating to more affordable housing markets. According to the real estate brokerage, the share of homebuyers moving from one part of the country to another has reached an all-time high.
Redfin’s data shows that nationwide, 32.3% of its online home-shoppers looked to relocate in January and February – an increase from 31.5% in the first quarter of 2021 and up from 26% in 2019, prior to the pandemic. Of all housing markets, Miami and Phoenix top the list of places where homebuyers are relocating to the most. In these cities, home prices have climbed, 28% and 27.7% since 2021, respectively.
“With out-of-towners driving up home prices in Phoenix, a lot of local first-time buyers have bowed out of the market,” Heather Mahmood-Corley, Phoenix Redfin agent, said in a statement. “They just don’t have the cash to compete, especially when there’s such limited inventory.”