A combination of record-low mortgage rates, remote work policies, and other factors are driving homeowners in large cities to look for new places to live.
Redfin published new data Thursday showing year-over-year increases in the number of Redfin users based in large cities including San Francisco, Seattle, Washington, D.C., Chicago, Denver and Boston searching for homes in other places. Overall, a record 27.4% of users were looking to move away in the second quarter.
According to Redfin economist Taylor Marr,
“The factors driving a surge in overall home buyer demand — low mortgage rates and changes in what people are looking for in a home—are lighting a fire in people who were already considering a move to a different area.
Add in employers’ increasingly flexible remote work policies and the fact residents of many big coastal cities can’t fully enjoy their local amenities, and the people who have long wanted to live in a more affordable area or closer to family are incentivized to make the move soon.”
In a recent interview with MBS Highway, Ivy Zelman of Zelman and associates gave some additional insight on how remote work is affecting the housing market.
“People who used to live in high-density areas like big cities are starting to move to the suburbs. COVID-19 has changed the way we look at remote work. Corporations are beginning to realize allowing some or all of their employees to work remotely is now a viable option.
We are going to start seeing families, who had been forced to live in high-cost housing in big cities due to work commutes, begin to move to the suburbs where they can purchase larger homes for less. This increased demand is going to push prices higher in those areas.”
Will This Move Impact Home Inventory?
Everyone is talking about the fact that inventory is so low. And we know that if we look at birth rates from 30 years ago, we can assume we are going to see an increasing rate of household formations which will put even more pressure on number of homes for sale.
So what would cause inventory to come on the market aside from new home construction? At this time last year, an aging population would have had more people moving out of their homes into long-term care facilities. But COVID-19 has everybody is terrified to do that due to the high percentage of deaths in nursing homes.
Back in 1998 to 2002, the move rate in the United States was roughly 15%. From 2013 to 2018, the move rate was approximately 11%. That mobility might be on a shift upward because of the change to remote work. As people start to recognize that they can move to a lower-cost market and their employer will still allow them to work, the move rate will start to increase which will ease some of the constraint around inventory.
But according to Zelman, a coronavirus vaccine might actually slow mobility and do even more damage to housing inventory.
“Right now people are looking around their homes and they’re realizing, you know what, I want higher quality space. I want a pool in my backyard so I don’t have to go to a public pool or I want a nicer outdoor area for having people over to socialize. People are not satisfied with their current homes. If we get a vaccine and now they can travel again and they can go back to baseball games, they’re not going to have all of this discretionary spend to focus on their homes.
So I think mobility will rise and help ease some of the constraints on inventory because we’re in this pandemic. But post pandemic, we might revert back to that headwind that’s keeping inventory so constraining.”
The Bottom Line
We understand the lack of homes for sale is frustrating, but there might be a light at the end of the tunnel as more Americans begin to work from home and upgrade their living spaces.
While we do not know for sure when the perfect home for you will come on the market, we can help you be completely prepared to make a competitive offer when it does.
If you would like to see how much financing you are able to qualify for or have a question about how the pre-approval process works, fill out the free consultation form below to speak with one of our mortgage advisors.
