Why are houses so expensive right now? Blame remote work

[Hamartia Antidote]

Why are houses so expensive right now? Blame remote work

Higher demand for working from home accounted for over 60% of overall price hikes and similar increases in rent between 2019 and 2021, new research has found.

www.cnbc.com

Published Wed, Sep 28 2022 8:30 AM EDT

Housing costs across the U.S. have soared to near-astronomical levels in recent months — and the shift to remote work could be to blame, according to new research from the Federal Reserve Bank of San Francisco.

Home prices rose 24% between November 2019 and November 2021, the research, which was published Monday, found. Increased demand for working from home accounted for more than 60% of overall price hikes and similar increases in rent during that period.

Economists August Kmetz and John Mondragon, of the San Francisco Fed, and Johannes Wieland, an economist and associate professor at the University of California, San Diego, noted that remote-capable workers “were able to relocate to cities with cheaper housing or more attractive amenities” as offices closed to curb the spread of Covid-19.

These cities saw the biggest uptick in housing costs, while regions “less amenable” to remote work experienced slower house price growth. Some of the cities that emerged as remote work hotspots during the pandemic include Charleston, South Carolina; Orlando, Florida; and Wilmington, Delaware, according to LinkedIn.

The researchers compared regions throughout the U.S. that had similar volumes of migration during the pandemic but different degrees of remote workers as well as areas that had different levels of migration yet similar degrees of remote workers to isolate the effect of remote work on housing demand separate from the effect of pandemic-spurred migration.

For example: Remote work increased in both the San Francisco Bay Area and Tampa, Florida during the pandemic, but the Bay Area experienced a pandemic exodus while Tampa’s population exploded. Yet homes in both regions got more expensive during the pandemic, Wieland tells CNBC Make It.

That’s because there was similar demand among remote workers in both regions for a new house, as the option to work from home allowed people to move farther away from the office and motivated them to buy larger houses to accommodate their new lifestyle, Wieland adds.


Even after adjusting for this migration, most of the effect of remote work on housing prices remains: Each 1 percentage point increase in remote work caused about a 0.9 percentage point increase in housing prices. The researchers also found that the surge in remote work had an “identical” effect on rent prices, which have hit record-highs across the U.S.

“Our results suggest that rising house prices over the pandemic reflected a change in fundamentals rather than a speculative bubble,” the authors wrote. “This implies that the evolution of remote work may be an important determinant of future housing costs and inflation.”

Even with signs that the housing market is cooling off, it is still hot, thanks, in part, to housing shortages, persistent inflation and economic uncertainty. Earlier this week, the average 30-year fixed U.S. mortgage rate hit 6.87%, the highest rate since 2002, and rent prices continue to soar in cities across the U.S.

Federal Reserve Chair Jerome Powell told reporters last week that the housing market needs a “difficult correction” to make homes affordable for more Americans.

“There was a big imbalance ... housing prices were going up at an unsustainably fast level,” Powell said. “For the longer term, what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again.”

 

[SaadH]

BS, houses are expensive because of the free money feds gave to wall street to go fleece ordinary americans even more than they normally do by taking over the housing sector by jacking up prices that no one would be able to match and renting those houses back to the people...

 

[Abdul Rehman Majeed]

BS, houses are expensive because of the free money feds gave to wall street to go fleece ordinary americans even more than they normally do by taking over the housing sector by jacking up prices that no one would be able to match and renting those houses back to the people...

Companies like Blackrock have bought all the homes on the market to jack up the prices and create artificial scarcity.

 

[Gripen9]

BS, houses are expensive because of the free money feds gave to wall street to go fleece ordinary americans even more than they normally do by taking over the housing sector by jacking up prices that no one would be able to match and renting those houses back to the people...

IN the Seattle market over 90% of homes were bought up by "investment" buyers between Jan-Sep 2021.

 

[Hamartia Antidote]

IN the Seattle market over 90% of homes were bought up by "investment" buyers between Jan-Sep 2021.

That's not the number the Seattle Times says

So you can’t afford a house in Seattle. Are investors to blame?

Homebuyers often want to know if investors are to blame for the skyrocketing price of housing in the Puget Sound region. New data from Redfin shows that the answer isn't straightforward.

www.seattletimes.com

Updated Nov. 20, 2021
The share of Seattle-area homes sold to investors has climbed steadily over the past two decades — from about 3% in 2000 to 9% this fall — according to data released by Redfin this week. Other measures vary, depending on how “investor” is defined. Those range from 6% to 29% of all home sales.

 

[nahtanbob]

Companies like Blackrock have bought all the homes on the market to jack up the prices and create artificial scarcity.

Blackrock has purchased - maybe 100,000 homes. It does not explain the whole story

 

[Abdul Rehman Majeed]

Blackrock has purchased - maybe 100,000 homes. It does not explain the whole story

That's a large chunk with one company when you consider the total inventory in the market.

 

[Gripen9]

That's not the number the Seattle Times says

So you can’t afford a house in Seattle. Are investors to blame?

Homebuyers often want to know if investors are to blame for the skyrocketing price of housing in the Puget Sound region. New data from Redfin shows that the answer isn't straightforward.

www.seattletimes.com

Updated Nov. 20, 2021
The share of Seattle-area homes sold to investors has climbed steadily over the past two decades — from about 3% in 2000 to 9% this fall — according to data released by Redfin this week. Other measures vary, depending on how “investor” is defined. Those range from 6% to 29% of all home sales.

I’ll find the news. There was a big segment on KIRO5 (nbc).

 

[tower9]

Uh no. Blame the bankers who control the government and manufacture policies to line their own pockets. This article is propaganda trying to deflect blame. The reason why the middle class is disappearing is because the billionaire class has hijacked the US govt completely for over four decades.

 

[Menthol]

For the property owners, the government is doing a great job to increase the property price greatly.

For the property buyers, the opposite happens.

 

[Hamartia Antidote]

Uh no. Blame the bankers who control the government and manufacture policies to line their own pockets. This article is propaganda trying to deflect blame. The reason why the middle class is disappearing is because the billionaire class has hijacked the US govt completely for over four decades.

Yes, the middle class is shrinking but not because they are moving to the low income class..it's because they are moving to the high income class. You can see how the percent of high income people is getting bigger and bigger in the US population to the point we almost have 3 equal sized groups.


Do you really think it is "bad" if two people in China with careers get married pushing them into the high income bracket causing the middle class to get smaller?

 

[gambit]

Why do people focus on one thing when they should know better that it is many things that contributes to prices of anything, from grocery to cars to houses? But the reality is that real estate prices are quickly affected locally, and other non-regional factors lags. Investors buying a bloc of houses take a longer time to affect local prices than a business announcing an expansion and/or opening.

Small Business Success Increases Real Estate Values

Small businesses impact real estate values by creating a thriving local economy. Learn how real estate and SMBs coexist and help their communities.

www.businessnewsdaily.com

Remote work is immediately beneficial to local businesses, especially the service industry, and remote work spending are real time, from ordering food to home office supplies. So despite some current controversies about some employers balking at remote work, either a hybrid or completely remote work are here to stay, and for some industries where remote work is possible, people will want to expand their houses to accommodate and that will make local houses more desirable.

 

[nang2]

View attachment 884699
Yes, the middle class is shrinking but not because they are moving to the low income class..it's because they are moving to the high income class. You can see how the percent of high income people is getting bigger and bigger in the US population to the point we almost have 3 equal sized groups.


Do you really think it is "bad" if two people in China with careers get married pushing them into the high income bracket causing the middle class to get smaller?

Household income is pointless since it doesn't say anything about the size of the household.

Why are houses so expensive right now? Blame remote work

Higher demand for working from home accounted for over 60% of overall price hikes and similar increases in rent between 2019 and 2021, new research has found.

www.cnbc.com

Published Wed, Sep 28 2022 8:30 AM EDT

Housing costs across the U.S. have soared to near-astronomical levels in recent months — and the shift to remote work could be to blame, according to new research from the Federal Reserve Bank of San Francisco.

Home prices rose 24% between November 2019 and November 2021, the research, which was published Monday, found. Increased demand for working from home accounted for more than 60% of overall price hikes and similar increases in rent during that period.

Economists August Kmetz and John Mondragon, of the San Francisco Fed, and Johannes Wieland, an economist and associate professor at the University of California, San Diego, noted that remote-capable workers “were able to relocate to cities with cheaper housing or more attractive amenities” as offices closed to curb the spread of Covid-19.

These cities saw the biggest uptick in housing costs, while regions “less amenable” to remote work experienced slower house price growth. Some of the cities that emerged as remote work hotspots during the pandemic include Charleston, South Carolina; Orlando, Florida; and Wilmington, Delaware, according to LinkedIn.

The researchers compared regions throughout the U.S. that had similar volumes of migration during the pandemic but different degrees of remote workers as well as areas that had different levels of migration yet similar degrees of remote workers to isolate the effect of remote work on housing demand separate from the effect of pandemic-spurred migration.

For example: Remote work increased in both the San Francisco Bay Area and Tampa, Florida during the pandemic, but the Bay Area experienced a pandemic exodus while Tampa’s population exploded. Yet homes in both regions got more expensive during the pandemic, Wieland tells CNBC Make It.

That’s because there was similar demand among remote workers in both regions for a new house, as the option to work from home allowed people to move farther away from the office and motivated them to buy larger houses to accommodate their new lifestyle, Wieland adds.


Even after adjusting for this migration, most of the effect of remote work on housing prices remains: Each 1 percentage point increase in remote work caused about a 0.9 percentage point increase in housing prices. The researchers also found that the surge in remote work had an “identical” effect on rent prices, which have hit record-highs across the U.S.

“Our results suggest that rising house prices over the pandemic reflected a change in fundamentals rather than a speculative bubble,” the authors wrote. “This implies that the evolution of remote work may be an important determinant of future housing costs and inflation.”

Even with signs that the housing market is cooling off, it is still hot, thanks, in part, to housing shortages, persistent inflation and economic uncertainty. Earlier this week, the average 30-year fixed U.S. mortgage rate hit 6.87%, the highest rate since 2002, and rent prices continue to soar in cities across the U.S.

Federal Reserve Chair Jerome Powell told reporters last week that the housing market needs a “difficult correction” to make homes affordable for more Americans.

“There was a big imbalance ... housing prices were going up at an unsustainably fast level,” Powell said. “For the longer term, what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again.”

Blame low interest rate. House price and stock market always go up when interest rate is low.

 

[Hamartia Antidote]

Why do people focus on one thing when they should know better that it is many things that contributes to prices of anything, from grocery to cars to houses? But the reality is that real estate prices are quickly affected locally, and other non-regional factors lags. Investors buying a bloc of houses take a longer time to affect local prices than a business announcing an expansion and/or opening.

Small Business Success Increases Real Estate Values

Small businesses impact real estate values by creating a thriving local economy. Learn how real estate and SMBs coexist and help their communities.

www.businessnewsdaily.com

Remote work is immediately beneficial to local businesses, especially the service industry, and remote work spending are real time, from ordering food to home office supplies. So despite some current controversies about some employers balking at remote work, either a hybrid or completely remote work are here to stay, and for some industries where remote work is possible, people will want to expand their houses to accommodate and that will make local houses more desirable.

If anything it likely spreads wealth to smaller mom and pop businesses vs large scale chains in cities.

Household income is pointless since it doesn't say anything about the size of the household.


Blame low interest rate. House price and stock market always go up when interest rate is low.

Average size of households in the U.S. 2023 | Statista

The average American household consisted of 2.51 people in 2023.

www.statista.com

Certainly going down but slowly after 1981.
If anything having more single households should lower the household income not raise it.

A large impact to the various numbers can be attributed to more women in the workforce.

 

[tower9]

View attachment 884699
Yes, the middle class is shrinking but not because they are moving to the low income class..it's because they are moving to the high income class. You can see how the percent of high income people is getting bigger and bigger in the US population to the point we almost have 3 equal sized groups.


Do you really think it is "bad" if two people in China with careers get married pushing them into the high income bracket causing the middle class to get smaller?

The income parameters they are using are incorrect. Wages have not kept up with inflation and what they define as a "middle class" income today equates to a lower quality of life then even 10 years ago, let alone 30 years. The decay all around society is a telltale sign that many are falling through the cracks.