Fed study shows remote work drove over 60% of house-price surge; trend seen in Spokane area
From staff and wire reports
The shift to working from home drove more than half of the increase in house and rent prices during the pandemic and will likely drive up costs and inflation going forward as the shift becomes permanent, according to research from the Federal Reserve Bank of San Francisco.
“The transition to remote work because of the COVID-19 pandemic has been a key driver of the recent surge in housing prices,” economists Augustus Kmetz and John Mondragon, of the San Francisco Fed, and Johannes Wieland of the University of California, San Diego, wrote in a note published Monday.
House prices increased 24% in the two years ended November 2021, Bloomberg News reported the authors wrote. More than 60% of that increase is attributable to the rise in work from home during the pandemic – a trend that has persisted, with 30% of work still being done from home as of last month.
“This suggests that the fundamentals of housing demand have changed, such that the persistence of remote work is likely to affect the future path of real estate prices and inflation,” the economists wrote.
The authors, who adjusted housing data to account for the migration from expensive cities to more affordable areas that occurred during the pandemic, found that each 1 percentage point increase in remote work results in about a 0.9 percentage point increase in house prices. The impact on rent prices has been identical.
In Spokane County, the median closing price for homes and condos on less than 1 acre was $416,450 in August, a 7.6% increase from $387,000 in August 2021, according to data from the Spokane Association of Realtors.
The rise in remote work and out-of-area residents moving to the Lilac City added to a pandemic homebuying frenzy in Spokane, which the National Association of Realtors predicted in 2020 to be one of the nation’s top-performing housing markets post-pandemic. The Spokane area also saw an increase in remote-work job postings during the pandemic, with the most in-demand industry sectors in professional, scientific and technical services, health care and social assistance and finance and insurance, Michael McBride, business and industry analyst for the Spokane Workforce Council, told The Spokesman-Review in June.
The Spokane Workforce Council monitors monthly job postings to determine labor demand via Emsi Burning Glass, a tool that tracks thousands of job-posting websites and companies’ internal web portals. In addition to increasing housing costs, rents in Spokane are up by 38.2% since the start of the pandemic in March 2020, according to rental data tracking site Apartment List. The median rent in Spokane is currently $970 for a one-bedroom unit and $1,310 for a two-bedroom apartment.
Spokesman-Review staff writer Amy Edelen contributed to this report.