Remote working shifts homebuyer preferences

As Californians continue to social distance due to the coronavirus (COVID-19) pandemic, many have shifted from their traditional office jobs to working remotely.

Just one-third of homes in California’s major metro areas have a spare bedroom to dedicate to a home office, according to a recent Zillow survey. Thus, a desire for more space is understandable and likely relatable.

first tuesday has long observed a shift in homebuyer demand away from the state’s suburban sprawl toward the urban job centers of California’s coastal cities. Quick access to jobs and social amenities, along with the ease offered by smaller homes with less maintenance, have increased demand for urban homes in recent years.

But as millions of people are now stuck at home — unable to enjoy the nearby restaurants, shopping and other amenities offered by urban living, or appreciate their short commutes — are homebuyers moving their search further into the suburbs, in search of more space?

Confusing short- with long-term trends

It makes sense that, in a pandemic, homebuyers will be more interested in purchasing a home with more distance between neighbors and access to a private yard.  But will the shift continue beyond the pandemic, through the coming decade?

According to the Zillow survey, 75% of individuals working remotely due to the pandemic want to continue doing so at least half the time after the pandemic response is over.

Further, a separate Redfin survey found that 28% of workers who are working from home during the pandemic expect to continue to be able to work from home after the response is over.

Returning to the Zillow survey, 66% of respondents claim if the ability to work from home does continue, they will be at least somewhat likely to consider moving further away from their job in search of larger, more affordable homes.

Wrapping our heads around these numbers, if roughly one-in-three workers continue to work remotely in the years ahead, two-thirds — or 18% — of those claim they will consider moving further away from their job to gain access to more space.

This may be a small share of the total homebuyer population, but in terms of numbers, it’s something working agents and brokers need to keep on their radar.

Forecasting buyer demand in the years ahead

first tuesday’s forecasts for California’s housing market have always focused on long-term trends, including demographic and job trends across the state.

For example, we know that thousands of Baby Boomers are retiring every day across the nation. As they retire, most will sell their outsized suburban homes in favor of purchasing smaller, more manageable homes, likely close to family or in retiree-friendly areas. 2020 won’t change this trend, though it may delay it for those who had retirement savings invested in the stock market.

Another example: Generation (Gen) Y had a late start to their careers following the 2008 recession and elongated recovery. This, alongside unprecedented levels of student debt, has caused them to enter homeownership late. But after a decade of recovery, these first-time homebuyers had finally amassed demand sufficient to push the housing market toward its next boom — at least, until the 2020 recession arrived.

So the question is, are 2020’s events enough to throw off the long-term trends that have been forming for the past decade and longer?

The answer lies in how the pandemic and underlying recession impact the longer-term trends. Boomers will still retire and Gen Y will still want to buy homes. But what about the sudden trend to remote working?

Researchers at the Brookings Institution believe remote working will receive a long-term boost from today’s necessary remote work conditions. However, they cite several long-term disadvantages to remote working, which can be solved by working remotely only part of the time or having chances to interact with in-office employees. Thus, an increase in offices where the entire staff works remotely 100% of the time is unlikely.

Rather than a potential switch to remote working, of more immediate to concern to agents is 2020’s significant job losses. In April 2020, the unemployment rate was at an historic high of 15.5% in California — and climbing rapidly, translating to a loss of nearly 3 million jobs in just two months. This is compared to the 12.3% unemployment rate which peaked in 2010 during the Great Recession.

Home sales volume and prices will decrease with California’s waning job numbers. Historically low interest rates are providing some support for home prices, but low interest rates will not be enough to make up for job losses and reduced incomes. Home sales volume and prices won’t recover until Californians emerge from the 2020 financial crash and recession, a recovery not to begin until 2022-2023.

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