The Effects Of Remote Work On Real Estate Across The U.S.
Kevin is the Founder of Marker Real Estate, an innovative firm with a transparent, inclusive, client-focused strategy.
Last April, real estate markets across the United States virtually ground to a halt as most viewings and closings were put on hold. A year later, we’re looking forward to what could be one of the most active seasons on record in recent years.
Key factors driving the current upturn include historically low mortgage rates and the ongoing exodus to the suburbs, which already started pre-pandemic. Another factor is a growing realization that the future of work will be dominated by remote and hybrid models. As a result, where and how people live is about to undergo a massive change.
Remote Work Is Here To Stay
Twitter was one of the first companies to give the green light to long-term remote work. In early May 2020, the company announced that employees who can work remotely will have the option to do so permanently. A few weeks later, Facebook made a similar announcement. Since last May, many other companies have made similar announcements.
Some companies — like Slack — have given all workers the green light to go permanently remote. Other companies, including Zillow, are offering a percentage of their workforce the option to work remotely. Still, other companies, like Salesforce, are giving some employees the option to go permanently remote and others the option of switching to a hybrid model that will reduce their time on-site to just a few days a week.
Whatever the proposed model, one thing is clear — the future of work isn’t going to revolve around centralized offices. This shift won’t just impact commercial real estate. It also stands to permanently alter rural, suburban and urban residential real estate markets nationwide.
The Rural Boom
With workers no longer expected to show up in person, at least not daily, where they choose to live will continue to change. Since the start of the pandemic, thousands of people have moved, with urban centers like San Francisco and New York City experiencing the greatest losses and nearby suburban areas experiencing the greatest gains.
While many people have been heading for the suburbs, rural and remote communities have also welcomed a high number of new residents. For example, Winhall, Vermont — a town with a pre-pandemic population of just over 700 residents — welcomed so many new residents in 2020 that their local school saw a 25% increase (paywall) in enrollments last September. Similar trends have been reported on the West Coast. By August 2020, brokers in Lake Tahoe and nearby Truckee were running out of inventory. Overall, Truckee saw a 23% increase in transactions.
Surging Prices In The Suburbs And Rural Areas Are Pricing Out A Different Demographic
In the past, urbanites were more likely to get priced out of neighborhoods than people living in the suburbs or small towns. This is no longer the case. As more urbanites sell high-valued houses and condos in cities and bring their money to the suburbs and rural areas, local residents are beginning to feel the squeeze.
In Truckee, California, for example, the housing market has been so active over the past year that by late February 2021, the average sale price had shot up 47% year-over-year. Similar trends can be found in New York State, especially in the Catskills region located just north of New York City. Here, some locals have already found themselves unable to compete with their new neighbors.
Urban Properties Are Back In Demand With New Expectations
After months of decline, there are strong signs that urban markets are beginning to pick up and will have a strong spring and summer. This partially reflects the fact that we’re now seeing the return of some people who fled cities early in the pandemic. Another factor includes renters who were once priced out of expensive urban markets seizing a perceived window of opportunity to buy. But the biggest factor driving urban sales may be homeowners’ changing needs.
In the past, the location was key and urban buyers were often willing to sacrifice floor space for a great neighborhood. With remote and hybrid work becoming the norm, even urbanites are increasingly looking for larger apartments and townhouses, which can accommodate one or more home offices and other amenities — like a dedicated workout space. With no expectation to commute daily, urbanites are also more likely to consider properties in neighborhoods further away from downtown business centers. Combined, these factors are helping urban markets rebound and leading to surprising changes within urban markets.
From bidding wars in rural communities and the suburbs to urbanites sizing up to carve out dedicated workspaces at home, this spring may yield more transactions than any quarter in recent memory. Where and what people buy over the coming months will also offer insight into the types of properties likely to be in high demand in the near future.
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