Rise in home work responsible for 15.1% rise in US home prices, says NBER analysis

A continued explosion in the popularity of working from home is directly responsible for 15.1 percent of the increase in average home prices.

Analysis found that working from home – which became normal for tens of millions during the pandemic – accounted for most of the house price increase of 23.8 percent between December 2019 and November 2021.

The shift to remote work during the pandemic is partly responsible for higher home prices in the United States, as people began to look for bigger and nicer properties to work from.

Statistics from the National Bureau of Economic Research (NBER) showed that by the end of the period, 42.8% of US workers were still working part-time or full-time from home.

Many chose to buy larger premises to make working from home more comfortable, the analysis found, driving up demand and prices.

Others moved to a new city altogether, and some cities saw real estate prices explode by a quarter.

“The rise in house prices during the pandemic reflected a change in fundamentals rather than a speculative bubble,” researchers wrote.

But the rise of remote working is making the already expensive housing market even more expensive.

Home prices in the Sun Belt attracted remote workers seeking a warmer climate.

According to the National Association of Realtors, prices in Austin, Texas were up 26% from the previous year. Prices in Phoenix also rose 26% and in Boise, Idaho, 24.3%.

Prices in Phoenix, Arizona (pictured), rose 26%

Johannes Wieland, an associate professor of economics at the University of California, San Diego, and co-author of the study, noted that cities such as Austin, Boise, Phoenix and San Diego saw some of the largest increases in home prices in the country.

‘Where more people work remotely, house prices grow there,’ says Wieland.

Wieland said these cities have three main features in common, including a predominant industry – such as tech jobs – that allows for remote work, a lower population density, where there is more space and more affordable housing.

“For example, it’s hard to work from home in New York City,” he said, explaining that having extra space for an office is costly. “Lower density areas are more attractive for remote working.”

Prices in Boise, Idaho (pictured), rose 24.3%

A third characteristic that the cities have in common is the warmer climate and the often attractive lifestyle.

“In good weather, there is more remote work,” he said. ‘If you are not tied to a location because of your work, you can choose where you want to be. Many of these places… are attractive to people who can move to a place for their lifestyle and not for work.”

Wieland added that the evolution of remote working is likely to have a major impact on the future path of house prices and inflation.

“We were quite shocked that remote work had this impact once we saw the estimates,” Wieland said. “We thought about how important it would be for people to move to different locations. And it is. But it’s the people who stay in a metropolitan area — the people who need more space at home when working from home — that really drive prices up. That’s the biggest part of the story.’

The study’s findings support what economists at Zillow have been tracking during the pandemic in what they call the “Great Reshuffling,” CNN Business reported.

“We’ve seen what we called the ‘Great Reshuffle’ that has contributed to housing demand across the country,” said Chris Glynn, senior managing economist at Zillow.

“It has accelerated trends that existed before the pandemic. Migrate to places like Austin [Texas] and Raleigh [North Carolina] has been going on for a while, but the pandemic accelerated it because of the disconnection between an office and a home that allowed people to make choices about where they wanted to live.”