The “big change” has played a big role in raising house prices

The pandemic has changed the way people lived, and for many, the way they lived. A new study found that working from home was a significant factor in this “big shift” and accounted for more than half of the sharp rise in house prices during the pandemic.

The pandemic has changed the way people live, and for many where they lived. A new study found that working from home was a significant factor in this “Great Permutation” and accounted for more than half of the sharp rise in house prices seen during the pandemic.

Remote work has allowed some people to move on site away from their office and encouraged others to buy bigger homes to adjust to their new lifestyle. According to the new National Bureau of Economic Research, the demand for more housing and the ability to move to warmer climates have played a significant role in raising house prices. working document researchers from the Federal Reserve Bank of San Francisco and the University of California, San Diego.

Housing prices rose 23.8% during the pandemic, according to a population-based analysis by researchers of the Zillow housing price index between December 2019 and November 2021. The study found that remote work accounted for 15.1% of this growth.

The results show that the rise in house prices during the turbocharged pandemic was not just speculation, said Johannes Wieland, an associate professor of economics at the University of California, San Diego and co-author of the study. He added that the evolution of telecommuting is likely to have a big impact on the further path of housing prices and inflation.

“We were very shocked when we saw the estimates,” Wiland said. “We thought about how important it would be for people to move to different places. And it is so. But it is the people who stay in the subway area – the people who need more space at home when they work from home – that really push prices. That’s a big part of the story. “

The results confirm what Zillow economists have seen throughout the pandemic.

“We’ve seen what we call the‘ big reshuffle ’, which has boosted demand for housing across the country,” said Chris Glynn, senior economist at Zillow. “This has accelerated the trends that existed before the pandemic. Migration to places like Austin [Texas] and Roles [North Carolina] It’s been going on for a while, but the pandemic has accelerated it because of the mismatch between office and home, which has allowed people to choose where they want to live. “

Which makes it a hot spot of remote work

The solar belt attracted remote workers looking for a way to live in warm weather even before the pandemic. But researchers found that the trend gained extra momentum during the pandemic, pushing housing prices in those areas much faster than before the pandemic.

According to the National Association of Realtors, by the end of the fourth quarter of 2021 the average price per family, the existing house in Austin has grown by 26% compared to last year. Prices in Phoenix also rose 26% and in Boise, Idaho, by 24.3%.

Researchers found that cities that already had a large proportion of remote workers before the pandemic tended to attract even more after the shutdown pandemic pushed a wave of people to work remotely.

“Where more people work remotely, housing prices are rising,” said Wiland, noting that cities such as Austin, Boise, Phoenix and San Diego have seen the biggest increase in housing prices in the country.

He said that these cities, convenient for remote work, have three main features. The first is the predominant industry that allows remote work. For example, technical work is easily done remotely because it mostly involves working on a computer, he noted.

The second aspect is lower population density, where there is more space and more affordable housing than in the country’s largest cities.

“For example, in New York, it’s hard to work from home,” he said, explaining that the cost of living there means that extra office space is valuable. “Areas with lower densities are more attractive for remote work.”

The third feature is a warmer climate or an attractive lifestyle. “Where the weather is good, more remote work,” he said. “If you’re not tied to a place because of your job, you can choose where you want to be. Many of these places … are attractive to people who can move to a place for lifestyle rather than work. ”

That is why in many cities of the solar belt during the pandemic there was such a huge increase in house prices, he explained.

Rapid impact on housing prices

The pandemic has prompted us to change the way we work very quickly, Wiland said.

“There was no period of peaceful time for us to change our way of working so quickly,” he said. “Suddenly we are moving further and further away from where our work is. We don’t need office space. We need this home space for work now. ”

In an ideal world you would like to see the economy adapt to these changes in benefits and opportunities, he said. “But housing is difficult to do in a year or two, especially at a time when supply is not very high,” he said. “That’s one of the reasons why house prices are rising so fast.”

In their study, Wiland and co-author John A. Mondragon, an economic research adviser with the Federal Reserve Bank of San Francisco, looked at the housing market, which is affected by many variables, including low supply of homes for sale, population growth. Millennials reaching the typical age of buying a home, and lowering Fed interest rates during the pandemic, led to ultra-low mortgage rates for more than a year.

Researchers measured how much housing prices have risen in the area because it is related to the number of remote workers living in the area.

NBER working papers are distributed for discussion and comment, but they have not been peer reviewed or reviewed by the NBER Board of Directors, which accompanies official NBER publications.

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