3 Ways Remote Work Changed the Real Estate Industry Forever
As per the U.S. Bureau of Labor Statistics, 43% of full-time employees worked at home in 2020 compared to only 22% in 2019. The doubling of remote workers has become particularly timely and relevant, given the aftermath of the pandemic with variants continuing to circulate throughout the United States. Many have wondered whether remote work impacts the price of real estate and how that may impact real estate investments.
How Remote Work Impacts Cost of New Homes
There is no question that remote work is changing the real estate market. On the one hand, it increases the demand for homes with separate office areas. The U.S. Census Bureau reported more than a third of U.S. households are working from home more frequently than before the pandemic.
There is an increased demand for multiple at-home offices that are needed to accommodate two or more adults working from home. In selected markets, national homebuilder KB Home introduced a home office concept designed to personalize the needs of homeowners working from home. The dedicated home office room is changing home construction, thus increasing the cost of new construction and residential value.
Remote Work Affecting Residential Investments
Remote work is also changing the price and value of homes based on location. The popularity of remote work is driving an “untethering” of people who feel the need to live close to expensive downtowns. Working remotely allows people to live further away from their centers of employment. As a result, home prices may slow their growth in urban locations but rise in suburban ones.
Although this could be excellent news for people looking for more affordable housing in costly markets, crowdfunding real estate investors need to validate the demand for residential real estate in specific locations.
For example, California already has some of the most expensive housing in the entire country. However, speculation holds that home sales will slow in costly areas, causing a decline in value and affordable prices in specific housing markets in the Golden State. The reason? Remote working.
Square, Twitter, and Coinbase are a few San Francisco headquartered companies offering employees the remote working option permanently. Job holders can now afford to move to more affordable areas, as they don’t have to live in expensive places close to work.
Where Are These Changes Occurring?
Besides the impact on residential real estate, the change caused by remote work is hurting specific commercial markets. Since people can now work from home, there is decreased demand for commercial spaces.
According to U-Haul’s Growth index data for 2021, California lost more people to migration than any other state in 2021. The three most significant states in the Northeast—New York, Pennsylvania, and Massachusetts were among the top 10 losers in migration trends. Individuals looking to start investing in real estate need to watch migration trends closely.
For major cities such as New York or Chicago, this can represent a real challenge to their real estate market, potentially causing a decline in prices and increasing vacancies. These ripple effects are also damaging retail and restaurant spaces, both of which are seeing an increase in vacancy as more workers stay at home and don’t shop in city settings.
Suburban areas are expected to continue booming due to these changes. People no longer need to go to work in the cities – or at least don’t need to go to those places as regularly. As a result, demand for homes in suburbia is skyrocketing, positively impacting the overall price of homes in suburban locations.
A Realtor.com research report showed that suburban listing prices have increased faster than urban prices. Additionally, a typical suburban home spends 9 days less on the market than last September, decreasing faster than the typical urban home. As such, it seems clear that remote working has a more significant spike in suburban home prices than urban ones.
Perhaps most interesting about these changes is that they impact a much wider breadth of locations than are typically seen when there are shifts in the housing market. For example, the rise of remote working is unquestionably impacting rural housing markets. Reports worldwide have found that the rise of remote working has resulted in more people and increased home values as individuals flee cities and move to quieter, rural areas. However, there is an essential condition: Rural areas must have access to reliable internet connections to take advantage of the rise in remote working. Otherwise, they will not be able to benefit.
Finally, it is worth considering that remote working has also made a real impact on rent prices, but not in a way you might think. One study found that areas with higher education – and thus more likely to work remotely – had slower rent growth than other areas. One possible reason? Remote workers can work or live anywhere. As a result, rents cannot increase as rapidly as before.
Remote working is unquestionably having an impact on the price of real estate. However, like all items related to COVID-19, the effect occurs in an uneven and often unpredictable way.
John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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