The COVID-19 pandemic has significantly changed the face of the workplace. More workers than ever went remote. Zoom became the new normal. Work from home became the norm. Although some employees have or will return to the office, many will continue to work remotely either part-time or full-time. One of the unexpected benefits of this arrangement is that working from home increased home value for many people. How could that be?
What Happens When You Can Work from Anywhere
Many people chose their housing location because of their jobs. They chose the city they wanted to live in because of its work opportunities. Moreover, they chose the neighborhood in part because of its proximity to the office. However, when you work from home, you don’t have to consider those things anymore. Instead, you can choose where you want to live based on entirely different factors. As a result, people have been (and are continuing to) move to new locations.
Where People Are Moving to and From
According to FlexJobs, people are generally moving away from expensive urban areas and towards more affordable smaller towns and cities. For example, people fled California, New York, New Jersey, DC, and Illinois. In other words, people who worked in big tech-heavy cities left for areas that were significantly more affordable. They moved to Idaho, Vermont, Maine, New Mexico, and the Carolinas.
Working from Home Increased Home Value in Those Areas
People who left California and New York had been used to paying exorbitant rents for very small spaces. Therefore, they were often shocked at the low cost of very large homes in these other cities. They could easily afford to pay for the luxury of a big space. In fact, many people who were renters for years became home buyers during the pandemic. That sounds counterintuitive until you think about the difference in cost between San Francisco rent and a New Mexico mortgage.
In fact, according to that FlexJobs survey, 65% of respondents would be likely to move if they knew that they could get a permanent work-from-home position. If they don’t have to return to an office in a big city but can still keep their jobs through remote work, then they would move. They cited many reasons that they’d make the move. However, nearly half of them said that a lower cost of living was a major factor.
Because of this migration of people who want to buy homes in these small areas, the supply of homes in those same areas began to shrink. People moved in, bought up the real estate, and the whole supply/demand issue came into play. There are only a certain number of houses available in each of those cities. Sure, eventually these cities can build new housing. However, that’s going to take time. Moreover, lumber prices are high right now, so that’s not going to help anytime soon.
As a result, home buyers are going to keep buying at higher prices. Therefore, if you’re a homeowner or landlord in one of those cities, your home value automatically increased just due to the market. You didn’t have to do anything at all.
Even Home Values in Suburbs Increased
Working from home increased home value in suburbs near major city centers for the same reason of supply and demand. Many people want to stay near the big cities that they love. However, if they can work remotely all or part of the time, then they’re more willing to move further out away from those city centers. They’re moving to neighborhoods that are a bit cheaper. Alternatively, they’re moving further out to the suburbs.
In those areas, they can get more house for their money. And people definitely want more house. Think about it. If you and your partner both work from home and the kids are going to school at home full-time or part-time, then you’re all on top of each other all day long. We’ve seen throughout the past year how stressful that can be. Suburban houses with home offices, dens, extra bedrooms, and more play space immediately become more appealing.
Just like in more rural areas, there are only a certain number of houses available in those neighborhoods and suburbs. The more people want to move there, the higher the price goes up. People who are used to paying city prices may still be willing to pay these increased home values to make that move. In particular, those people who can keep their high-paying jobs while working remotely are often comfortable spending a lot of money on a larger, more comfortable house.
Running the Numbers
According to Investopedia and Redfin, it’s definitely true that working from home increased home value. As of early May 2021, using prices were more than 20% higher than at the same time last year. New housing listings were selling faster than ever. Moreover, nearly half of them sold for higher than the original asking price. Prices are expected to continue to rise, likely by more than 6% this year. There is still 30% less housing available for sale than there was a year ago, which means that the supply and demand situation remains in the favor of home sellers.
How You Can Further Increase Home Value
If you’re thinking about selling or renting out a home to these people who are moving to your area, then there’s one big thing that you can do to further increase the value of the home. Make it home office friendly. Working from home increased home value because people can work from anywhere. However, they want to be comfortable in their home offices. So if you can make some tweaks to the home to create more private office space then you’re more likely to get a significantly higher value for the home.
You might also want to consider becoming a pet-friendly landlord if you’re not one already. After all, many people decided to adopt pets during the pandemic. They were finally going to be home enough to enjoy and care for their animals. They aren’t going to want to move to a house that won’t let them take their furry friends with them. Therefore, if you’re interested in renting out your home to new people as housing values rise, you’re wise to allow pets to move in with them.
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