It’s no secret that Americans’ newfound remote work lifestyle has fueled demand for larger homes with more comfortable workspaces.
What’s new: That demand could account for more than half of the surge in house prices during the pandemic, according to a working paper Published by the National Bureau of Economic Research.
- It is one of the first papers aimed at quantifying how remote work has transformed the housing market.
Why it matters: If the research holds up, it signals a sea change in the housing market — that it wasn’t just low interest rates and fiscal stimulus that drove home prices higher.
Using the numbers: It found that remote work accounted for about 15 percentage points of the average 24% increase in house prices between December 2019 and November 2021.
Details: The paper’s authors are John A. Mondragon, an economist at the Federal Reserve Bank of San Francisco, and Johannes Wieland of the University of California, San Diego’s School of Economics.
- The researchers found that regions with the highest rates of remote work experienced much higher growth in home prices during this period after accounting for COVID migration.
- They also observed a similar effect on residential rents – along with a decrease in commercial rents – in these areas.
What you say: This implies a shift in demand as many pandemic home buyers and renters sought to upgrade to larger and more expensive homes to support their remote working lifestyle, Mondragon said said the San Francisco Chronicle.
The bottom line: Policymakers like those at the Fed would do well to keep a close eye on developments in remote work, as it will help determine the future of house prices — and headline inflation, the economists wrote.
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