At the height of the COVID-19 pandemic, many white-collar workers suddenly had the ability to work from anywhere—anywhere, that is, with an internet connection stable enough to attend Zoom meetings. Shell-shocked by fast-rising home prices and in desperate need of more square footage, many left their city apartments and small homes in the nearby suburbs behind and purchased much larger, more affordable houses in the farthest out suburbs and smaller cities. Remote work helped to turbocharge these real estate markets.
And then big employers like Amazon, Salesforce, and Disney began calling workers who had been able to telecommute back into their offices. Those big, cheap houses that these buyers had clamored for just months before were abruptly less appealing given the long, expensive commutes that many homeowners and renters were facing.
And now the future of those previously hot real estate markets in the most remote suburbs, also known as exurbs, and secondary cities has become uncertain.
“These ‘Zoom towns’ are the places at most risk of prices actually falling year over year,” says Lisa Sturtevant, chief economist of the Bright MLS, the multiple listing service covering the mid-Atlantic region.
“During the pandemic, they were attracting higher-income buyers who were able to bid prices up,” she continues. “Now, those markets are really resetting to reflect local incomes, which are lower. … Demand has pulled back pretty dramatically.”
With home prices and mortgage rates high, many buyers can’t afford the closer, family-friendly suburbs. So they have been looking farther out in the exurbs where they might be able to find more affordable homes, especially if they’re expecting to commute only a few days a week. These are also the areas where builders have been putting up more new homes, since there is generally farmland available that can be converted into new housing developments.
But now, workers who thought their days in open offices and cubicle farms were over are having to weigh the value of the time they’re losing commuting to work against lower real estate prices. Some might decide to list their homes. City folks who didn’t decamp during the pandemic might decide to stay put. And these areas are likely already seeing fewer out-of-state investors and buyers as the real estate market has cooled nationally.
The outer suburbs and smaller cities “are going to be the markets that are going to be the most challenged,” says Ken Perlman, managing principal at John Burns Real Estate Consulting.
For workers going into an office three days a week, a commute time of up to two hours one way is typically their limit, says Sturtevant. Workers who can take reliable public transportation might be willing to commute a little longer, while those stuck crawling in traffic might have a lower threshold.
Those who are fortunate enough to commute just once or twice a week might be willing to live farther out than those going in most days.
“People definitely have more flexibility, but we haven’t determined where that tipping point is,” says Perlman. “I don’t know how far out people have said is enough.”
Who’s going back to the office?
Generally, it’s been the white-collar workers who have been able to telecommute.
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It’s important to note that the majority of the U.S. workforce isn’t able to work remotely all or even some of the time. Generally, it’s been the white-collar workers who have been able to telecommute, while many health care professionals; retail, warehouse, and restaurant staff; and other service workers have largely been on-site during the pandemic.
In February, about 12% of full-time U.S. employees were remote all of the time, 28% had a hybrid schedule, and 60% were on-site, according to WFH Research. The data is based on surveys run by the University of Chicago, Instituto Tecnológico Autónomo de México, Massachusetts Institute of Technology, and Stanford University.
About 45% of all employees who can work remotely are on hybrid schedules, according to WFH Research.
“While some companies are implementing full return to office policies, it is more common to see a switch from fully flexible schedules to a hybrid schedule with specified ‘anchor’ days for teams to be in the office,” says Shelby Rae Buckman. She is a doctoral student at Stanford University contributing to WFH Research.
Still, remote work shouldn’t be considered a fast-fading, pandemic-era remnant akin to colorful cloth masks or Pelotons.
In fact, remote work could grow in the coming years as the economy improves, more young people train for remote roles, and baby boomers retire from management roles, says Matthew Kahn. He is an economics professor at the University of Southern California and the author of “Going Remote: How the Flexible Work Economy Can Improve Our Lives and Our Cities.”
He believes the reason many companies are ordering workers back into offices is to thin out their ranks. If workers quit, companies don’t have to fire them or pay them costly severance.
The career portal FlexJobs saw a 9% increase in the number of hybrid and fully remote job listings in January compared with the previous year.
“We anticipate this trend to continue well into the future as more employers embrace permanent remote workplaces,” says Doug Ebertowski, a career expert at FlexJobs.
Workers are expected to keep their homes
Many workers have said in surveys that they were more likely to find a new job, rather than a new home, if they were called back into their offices.
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The uncertainty in the outermost real estate markets isn’t expected to turn into a crisis unless homeowners decide to sell en masse—and that’s not happening. The majority of homeowners who purchased their properties during the pandemic aren’t expected to put those homes back on the market—at least not yet.
Many could lose money if they try to sell their homes today. In some parts of the country, home prices have dipped a little, which cuts into potential profits. And if they’re trying to buy a different home closer to the downtowns of larger cities, they’re likely to pay more for a home in those desirable areas. Those needing a mortgage will also be saddled with a mortgage interest rate in the 6% range, which could be double what they already locked in for their existing homes.
Plus, there’s still a severe shortage of housing making it difficult for buyers to find new homes.
Many workers have said in surveys that they were likelier to search for a new job rather than a new home if they were forced back into their offices. There are still more job openings than there are workers to fill them. But there aren’t enough homes to go around.
“People will probably put up with a lot right now rather than have to move,” says Realtor.com® Chief Economist Danielle Hale. “It’s not a friendly housing market for buyers.”
Those who do go through with a sale are likely to move to communities within shorter commutes of big-city downtowns. This could boost prices in these popular suburbs or smaller cities.
“With proximity to work becoming more valuable … it’s going to be more important to live closer in,” says Hale. “That’s going to put a premium on homes that are closer to downtowns.”
The future of outer suburbs and smaller cities may still be bright
Many people would rather live in more affordable, smaller towns and rural areas than the bigger cities where their jobs are based.
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Real estate experts believe the real estate markets in farther-out suburbs and smaller cities will hold up, but they won’t be as hot as they were during the pandemic. They aren’t likely to see as many high-income buyers bidding up prices as there were during the pandemic when folks were desperate for larger homes in less populated communities.
“Those more far-flung communities had their heyday during the pandemic,” says Sturtevant.
But over the long term, exurbs could grow again in popularity, says Ed Pinto, director of the Housing Center at the American Enterprise Institute, a conservative-leaning think tank.
Many people would rather live in more affordable, smaller towns and rural areas than the bigger cities where their jobs are based. If they don’t have to commute as frequently, many will find ways to make it work.
“Hybrid work will help drive the exurbs,” says Pinto. “Long term, moving from expensive places to less expensive places is going to continue.”
These areas will also be where much of the new construction goes up. If these towns evolve and restaurants, bars, and entertainment venues open up in these communities, they become more attractive to potential residents and employers who can hire local workers.
“During the pandemic, it was really easy for people to say, ‘We’ll never go back to offices,'” says Perlman, of John Burns. “But we’re experiencing [now] a population that is not taking work from home as a given. They’re balancing ‘How do I have access to my office’ and ‘How do I still get the value I want in my home in a location I can manage.’ That’s the struggle right now.”
The post As ‘Zoom Town’ Settlers Are Forced Back to the Office, Many Must Choose: Keep My Job, Or My House? appeared first on Real Estate News & Insights | realtor.com®.