The housing market has changed, and reopened offices won’t change that

Although employers’ return-to-work plans are looming, the coronavirus’s highly contagious Delta variant has pushed back the plans of many major companies. For example, Google has extended its voluntary return-to-office policy through Jan. 10, 2022. And the pivot to remote work and hybrid work has propelled the housing market over the past year, contributing to an uptick in homebuying in the suburbs, said Taylor Marr, a lead economist at Redfin, a data-driven real estate brokerage. 

“One thing that really fueled the housing boom was that mortgage rates dropped,” Marr said. Buying a home with a $2,000 a month mortgage in cities like Boise became more desirable for some than the $2,000 monthly rent payment in a big cities like San Francisco or New York, he said. In the spring and summer of 2021, home prices grew faster than in any period on record, Fortune reported. The sales of existing homes rose 2% from June to July, according to a National Association of Realtors’ Aug. 23 report.

But what will happen to the housing market once employers reopen offices? There won’t be a retreat from the suburbs, Marr said. “When people buy a home, they tend to stay there for about five to 10 years on average,” he said. 

“I don’t necessarily know that anyone who purchased a home in the last year and a half—and is enjoying the space—that they suddenly would sell that property to move back into a city center,” said Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. However, smaller condos on the market in city centers could provide an opportunity for first-time homebuyers who may have been shut out of the market in the past several years, Lautz said. 

“At least in part, what we’re likely to see happen is a bit of a resurgence in terms of the urban housing markets,” and this will be led by young professionals, Marr said. “People don’t live in cities just because of the [easy] commute, they live there for a lot of cultural reasons as well,” he said. And Americans are still moving to what have become pretty expensive cities like Austin, Denver, and Nashville, Marr said.

“They’re cheaper relative to the places that people are coming from; we’ve actually looked at the budgets of people that are moving there,” he said. “But what I would say is these are pretty competitive housing markets.” In Austin there’s also the potential for job growth, if you’re in the tech industry. Oracle, one of Silicon Valley’s largest tech companies, moved its headquarters to the city in December 2020. And Tesla has been building a Gigafactory in Austin since July 2020.

Another trend that started to pick up speed during the pandemic was a “second-home boom,” Marr said. “A little bit of that is fueled by remote work as well.” But it’s starting to fizzle some. In July, the demand for second homes fell 21% year over year, an Aug. 17 Redfin report found. It’s the second consecutive month of annual declines in mortgage-purchase locks. But the drop followed 13 months of increased activity in second-home purchases.

One thing’s for certain, in the past year, “there has been a transition in how Americans live,” Lautz said. Maybe that means being “dependent on our home cooking and wanting to have our own farm-to-table restaurants with our home gardens. There has been a change in how we’re utilizing our spaces.”