How Post-Pandemic Returns To The Office May Drive Real Estate Pricing

Working-class Americans may once again be looking for homes with shorter commutes, selling their houses in the distant suburbs and bringing the housing market high tide back into cities. As the pandemic surged onward through 2020 and 2021, long-term remote work became a more realistic possibility, and many renters and homeowners saw a desperate need for square footage. Anyone who shared a small home office with their spouse or squeezed a laptop onto their cramped kitchen table can relate to the struggle for more elbow room. As a result, renters and homeowners scrambled to find big, cheap houses, often in remote areas or distant suburbs called "exurbs." For the last year or so, life was good for these long-distance workers, but those sunny days in sweatpants may soon be coming to an end.  

According to a survey by Resume Builder, about 66% of companies currently require employees to work in-office, but 90% of companies are planning to bring workers back in 2023. Now that many people are being pulled back into their downtown cubicles, the need for extra space in their homes has dwindled, and some are stuck paying mortgages on homes where they no longer spend the majority of their day. What will the return to in-office work mean for homeowners, and what does that spell for the housing market? Here's what you need to know.

Before we can consider how the housing market may change, we must first understand how people are responding to the call back to in-office work. For the past few years, many workers have enjoyed having more flexible schedules, spending more time with their families, and even working in sweatpants on most days. After experiencing these perks of remote work, many would prefer never to return to the doldrums of in-person office life. Unfortunately, the majority of companies plan to make in-person work a requirement, placing previously remote workers in an uncomfortable situation, especially if they no longer live near the office. 

Some may choose to keep making the long commute from their exurb homes to downtown spaces, but for others, that simply isn't an option, or they refuse to rejoin daily rush hour traffic. Unless they can negotiate to work remotely part-time, homeowners are left with two options: sell the house or find a new job. Which choice seems to be the lesser of two evils? Surveys indicate that most workers would rather find a new job than enter the rocky housing market at this time, according to Realtor.com. Nonetheless, the winds are shifting, and downtown housing may soon be making a strong comeback. 

For now, most workers currently living in exurbs will keep trying to balance the best of both worlds, spending as much time as they can at home while keeping their office within reach. In addition to homes already being expensive and in low supply, people could be trading up to a much higher mortgage rate if they choose to move closer to the city. Back in 2020, the average 30-year mortgage rate was 3.10%. Today, that rate has more than doubled, sitting around 6.92%, meaning that homeowners could potentially lose money if they try to sell and move now. Simply put, it's easier to get a new job than it is a new house these days. 

Some people may opt to move closer to city offices again, increasing demand for suburbs and downtown housing, but we probably won't see a mass migration. However, demand for rural homes and large, cheaply built houses could slow down, especially from high-income bidders and investors. That's not to say that prices will decrease in more rural areas, but demand has certainly cooled off since peaking during the pandemic. The exurbs are still a strong place to hold tight in terms of investment; cities will continue to expand as more shopping, entertainment, and restaurants are built around existing neighborhoods. If you're currently faced with a choice between commute and career, the better long-term decision could be to stay put, update your home office, and potentially upgrade your job.