It’s no secret that Americans’ new remote working lifestyles have spurred demand for larger homes with more comfortable workspaces..
What’s new: This demand could be responsible 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.
- This is one of the first articles that aims to quantify how remote work has reshaped the housing market.
Why is this important: If the research holds, it signals a fundamental shift in the housing market – that it’s not just low interest rates and fiscal stimulus that have driven house prices up.
By the numbers: It revealed that remote work drove around 15 percentage points of the average 24% increase in house prices between December 2019 and November 2021.
Details: The authors of the article are John A. Mondragon, an economist at the Federal Reserve Bank of San Francisco, and Johannes Wieland, of the economics department at the University of California, San Diego.
- The researchers found that after controlling for COVID migration, regions with the highest rates of remote work experienced much higher house price growth over the period.
- They also observed a similar effect on residential rents – as well as declines in commercial rents – in these areas.
What they say : This implies a shift in demand, as many pandemic home buyers and renters have sought to upgrade to larger, more expensive homes to support their telecommuting lifestyles, Mondragon told the San Francisco Chronicle.
The bottom line: Policymakers like those at the Fed would do well to pay close attention to developments in remote work, as it will help determine the future of house prices — and headline inflation, the economists wrote. .