Remote workers drive housing market movements

These days, the old adage “A man’s home is his castle” needs an addendum: “if it’s also his office.”

While rising rates pushed many buyers out of the market in 2022, those still buying did so in a big way. For the year ending in June 2022, homebuyers moved a median 50 miles away, far longer than the 15-mile median of the previous few years, according to the National Association of Realtors (NAR).

The long-haul moves can be explained by other studies, showing that homebuyers working remotely were looking for larger homes with home office space, at prices still affordable, despite higher mortgage rates. Those places were often smaller towns, farther away from the cities and suburbs that previously attracted many buyers when the pandemic hit.

By August of 2022, the share of workers who are remote “appears to have stabilized near 30 percent,” reads the recent Federal Reserve Bank of San Francisco study, “Remote Work and Housing Demand.” Moreover, Jessica Lautz, deputy chief economist at the NAR, reports: “For many, remote work decisions were formalized in the last year, providing clarity for employees to permanently move to more distant areas.”

Indeed, remote work will probably continue, along with traditional drivers, such as interest rates and economic conditions, impacting housing demand.

Small towns gain affordability-minded remote workers when rates rise.

According to The Wall Street Journal/Realtor. com Emerging Housing Market Index, in the third quarter of 2022, Johnson City, Tennessee, followed by VisaliaPorterville, California, and Elkhart-Goshen, Indiana were the top three markets for buyers seeking affordability and good lifestyle. Earlier in the pandemic, now more pricey markets such as Coeur d’Alene, Idaho, were most popular.

But the suburbs can come back.

High rates knocked out one earlier trend of workers who commute less frequently to the office moving to outer suburbs. But a Federal Reserve Bank of Kansas City study predicts that home construction in outer suburbs, particularly in the Chicago, Los Angeles, Philadelphia and Boston areas, where workers have the longest commutes, will rise when rates drop.