Remote work drove more than 60% of home price surge during pandemic: Fed study

The shift toward remote work was overwhelmingly responsible for the major surge in home prices that occurred during the COVID-19 pandemic, according to research conducted for the Federal Reserve Bank of San Francisco. 

The Fed researchers noted that US home prices jumped by 24% from November 2019 to November 2021 – a period in which as many as 60% of employees were working from home as COVID-19 spread.

More than 60% of the increase in home prices during that period was attributable to the remote work trend, the study concluded. The researchers noted that remote workers “were able to relocate to cities with cheaper housing or more attractive amenities.”

“Our results suggest that rising house prices over the pandemic reflected a change in fundamentals rather than a speculative bubble,” said economists Augustus Kmetz and John Mondragon of the San Francisco Fed and Joh annes Wieland of the University of California, San Diego.

“This implies that the evolution of remote work may be an important determinant of future housing costs and inflation,” they added.

Home for sale
Remote work will be a key factor in determining home prices in the future, economists said.
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Bloomberg was first to report on the research.

The researchers arrived at their result by adjusting data to account for the migration to cities that were “more attractive” to remote workers.

“Even so, after adjusting for the role of migration, our estimates show that 1 percentage point more remote work causes house prices to increase by about 0.9 percentage point, smaller than the initial estimates but still very large,” they added.

Home prices surged to record highs during the pandemic-era housing boom, when workers were no longer tied to housing within commuting distance of their jobs. But the market has since cooled as rising mortgage rates hammer affordability and push many buyers to the sidelines.

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Home prices have begun to recede in some markets.
Christopher Sadowski

Meanwhile, return-to-office pushes in many companies have led many workers to return to cities, causing a spike in rent costs that has contributed to decades-high inflation.

Home prices have begun to recede in many markets, especially those considered “overheated” by pandemic-era demand.

As The Post reported earlier Monday, home-purchase contract cancellations hit fresh highs last month as leverage shifted back toward buyers — with the highest rates found in Sun Belt “boomtowns.”