Remote work has fueled U.S. house prices during the pandemic — so what happens when people return to the office?

Remote work has played a major role in rising house prices in the US during the first two years of the pandemic, but how much?

Many lucky people have had the freedom to live wherever they want during the pandemic. John Mondragon, an economist at the Federal Reserve Bank of San Francisco, and Johannes Wieland, an associate professor in the Department of Economics at the University of California, San Diego, published an article this week with a bold conclusion: the change to remote work explains more than half of the 23.8% increase in the national housing price between 2019 and November 2021.

The researchers wrote: “Our findings imply an explanation based on the fundamentals of recent increases in housing costs in the face of speculation or financial factors, and that the evolution of distance work is likely to be large. effects on the future path of house prices and inflation. ” The document was distributed Monday by the National Bureau of Economic Research.

Rising home prices have pleased those who can and are willing to sell, but it has caused heartache for millions of first-time buyers who yearn to set foot on the property ladder.

House prices rose 15.6% year-on-year in April, reaching an average price of $ 424,824, according to Redfin RDFN.
On average, the number of homes sold fell to 545,706, a decrease of 13.2% over the previous year.

The 30-year fixed-rate mortgage averaged 5.3% for the week ending May 12, according to data released by Freddie Mac FMCC.
To put it in context: the average rate stood at 2.94% a year ago.

A recent Gallup poll found that only 30% of Americans believe this is a good time to buy a home. This is the lowest level since Gallup began surveying Americans on this issue in 1978, and this is the first time less than 50% of people across the country have thought it was a good time to buy. .

Housing costs, which can account for a third of the average household paycheck, rose 5.1% last year, the fastest annual rate since 1991, while rents have risen. increased by 4.8% compared to a year ago. , according to the Department of Labor.

The latest NBER research details the relationship between distance labor and housing prices. “Using the variation of exposure to remote work in U.S. metropolitan areas, we estimate that an additional percentage point of remote work causes a 0.93% increase in home prices after controlling the negative outflows from migration, “the authors wrote. “This cross-sectional estimate combined with the aggregate shift to remote labor implies that distance labor increased aggregate housing prices in the United States by 15.1%.”

But rising house prices could be reversed as people return to the office. CoreLogic predicts that house prices will slow to a 5% growth rate in 2023, while Fannie Mae FNMA,
sees warmer growth of 4.2% next year.

“Our findings also imply that the future path of housing costs may critically depend on the path of distance work,” the NBER document added. “If remote work is reversed, there may be a general reversal of housing demand and potentially house prices. If remote work persists, we can expect significant repercussions, as Rising housing costs fuel inflation and therefore affect the monetary policy response. “


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