High Home Prices Saw a Spike Due to the Change in the Way People Live

 The pandemic has shifted our normal in more ways than one. During the stay-at-home orders, we learned to live, work and play from our home. Studies show that working from home played a huge part in the increase in home prices. Home prices saw a 23.8% increase during the pandemic according to Zillow's home price index between December 2019 and November 2021.

Everyone had to learn to do most anything remotely from home. Working remotely allowed us the flexibility to live where we wanted even if it was farther away from our place of work. It started a trend of buying larger homes to accommodate the live, work, and play way of life from our home.

"There hasn't been a peacetime period where we have changed the way we do work in such a quick fashion," Johannes Wieland an associate professor of economics at the University of California, San Diego said. "Suddenly, we are moving further away from where our work is located. We don't need the office space. We now need this home space for work."

Two factors that played a big role in rising home prices according to the Federal Reserve Bank of San Francisco and the University of California, San Diego were the demand for more house and moving to a warmer climate. Wieland suggests that the evolution of remote work is likely to have a large impact on the future path of home prices and inflation.

"We were pretty shocked remote work had this impact, once we saw the estimates," Wieland said. "We thought about how people moving to different locations would be important. And it is. But it is the people who are remaining in a metro area -- the people who need more space at home if they work at home -- that is really pushing up prices. That is the majority of the story."

This finding is backed by the economists at Zillow. The shift has been deemed the "Great Reshuffling" and can contribute to the influx of demand for larger housing in warmer climates. Before the pandemic, economists saw an increase in home purchases in Austin, Texas, and Raleigh, North Carolina, but this influx grew greater in size to more areas once the pandemic hit. Now people can choose where they want to live because they are not tied down to moving close to work.

"There is more remote work where the weather is nice," Wieland said. "When you're not tied to a location because of your job, you can choose where you want to be. Many of these places...are attractive to people who can move to a place for lifestyle and not for work."

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