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Remote Work’s Significant Impact On Real Estate Lingers; Possibly Forever

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When the coronavirus pandemic hit the U.S. in 2020, one of the biggest impacts it had beyond health issues was on the housing market.

Suddenly, thousands of office workers had the freedom to relocate to further-flung and often more affordable locations.

The trend was so significant that some dubbed it the “Great Reshuffling,” and a report one year ago described it as the most significant issue impacting real estate at the time.

But as the pandemic’s social impacts have waned, we might have expected all this reshuffling to also wind down too, right?

Wrong.

Arvind Krishna. Credit: Brian Ach and Getty Images

That, at least, is the takeaway from IBM CEO Arvind Krishna, who on Monday said that only 20 percent of his company’s workers are coming into the office at least three days a week right now. Moreover, Krishna — who made the remarks at the Aspen Ideas Festival — said he believes IBM will never get back to having 60 percent of its workforce in the office more often than not.

In other words, remote work is here to stay, potentially forever.

Obviously, this is just one company. But IBM is massive, with nearly 300,000 employees, according to Fortune. And that means it serves as a useful bellwether for the knowledge-based economy; if IBM is sticking with remote work, then so too will other companies. Indeed, many will likely have to accept remote work to compete for talent with a behemoth like IBM.

In any case, IBM is of course not alone. Other companies that have implemented permanent remote work policies during the pandemic include Spotify, Lyft, Coinbase, Reddit, 3M, Twitter and many others, according to CNBC.

The point here is that, while it was always clear the pandemic’s impact on working culture was significant, it is increasingly looking like it’s also permanent — which wasn’t always a foregone conclusion. The debate, and sometimes tug-o-war, between employers and employees is still ranging, but Krishna’s comments were clear and unequivocal.

“So I think we’ve learned a new normal,” he concluded Monday.

And if remote work is the new normal, it follows that the impacts of the housing-centric Great Reshuffling are also permanent.

The data bears this out.

During the first quarter of 2022, “out-of-market home shopping” — or in other words people looking for homes in places other than their current cities — was up both compared to the previous three months and compared to the same quarter in 2021, Realtor.com found in a report from last month.

Credit: Realtor.com

That’s significant because while the pandemic was still a major health issue at the beginning of 2022, there were far fewer social restrictions and isolation mandates in place at that time compared to the beginning of 2021. And of course, vaccines were widely available during the first quarter of 2022 but not at the beginning of 2021.

In other words, by the beginning of this year it was starting to look like the worst of the pandemic’s social impacts were in the rearview mirror. Nevertheless, out-of-market home shopping was still increasing.

Realtor.com’s report further revealed that the South and the Sunbelt were particularly attractive to out-of-market shoppers, and “gains in page views from out-of-market shoppers are concentrated among markets with relatively lower median listing prices.”

Given that affordability appears to be a key factor in out-of-market shopping, it’s certainly possible that the ongoing market shift — which has been driven by skyrocketing mortgage rates — could slow the exodus from, say, pricey coastal metro areas to more affordable regions of the U.S.

But if remote work is sticking around, as Krishna suggested, that means relocation remains on the table perpetually. In other words, as workers adjust to the “new normal” the mass exodus of the last two years may slow, but there could always potentially be a trickle as consumers’ life situations and careers evolve. Put another way, the classic move from Manhattan to New Jersey or Connecticut that many professionals opt for as they start families may turn into a move from Manhattan to Austin or Boise.

This obviously has implications for real estate professionals, some of whom could end up with bigger and more diverse client bases while also having to ensure they’re reaching consumers who may not yet even live in their states.

These trends may also permanently reshape the kinds of housing that wins the most attention and the neighborhoods that are the most desirable. Late last month, for instance, Zillow reported that pricey suburbs were proving to be the most popular housing markets of early 2022. The portal specifically named Woodinville, Washington, as the most popular real estate market so far in 2022.

Woodinville sits within the Seattle metro area — notably a region with a tech-based economy — but lies about a half-hour from downtown.

Zillow’s other top markets including Burke, Virginia, and Highlands Ranch, Colorado, are also similarly situated on the peripheries of larger metro areas. And in fact, the report notes that “every city in Zillow’s latest 10-most-popular-markets list is a suburban area roughly 30 minutes from the nearest city center.”

Another Zillow report found that “the typical suburban home gained more value over the past year than the typical urban home.

Both of Zillow’s recent reports tie these housing trends to changes in employment patterns, with the earlier report noting that “the rise of remote work has had a tangible effect on where and how people live.”

“Remote work is a key reason suburban home values are now growing faster than those in urban areas as home buyers are prioritizing space and affordability over a short commute,” the latter report added.

The takeaway: Remote work and housing are deeply intertwined and as one evolves, so too does the other.

And all signs are that the evolution will continue. In a report from earlier this month, Redfin noted that the housing market is cooling down. However, despite that fact, homebuyers remain “keen on moving from one part of the country to another.”

Like previous reports, Redfin’s points to affordability issues as part of the equation in this trend and notes that Florida is popular among people who are relocating. Alternatively, San Francisco, Los Angeles and New York “saw more homebuyers looking to leave than any other metro in April and May.” But significantly, the report frames these trends as something that will stick around for the long term.

“Because many buyers now work from home permanently,” the report noted, “it’s more feasible to relocate to relatively affordable places like parts of the Sun Belt.”

Email Jim Dalrymple II

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