3 minute read
US Real Estate
MILTON EZRATI is chief economist for Vested, a contributing editor at The National Interest, and author of "Thirty Tomorrows" and "Bite-Sized Investing.” Milton Ezrati
Small-Town America Reborn?
Remote work may reverse 100 years of decline
With the COVID-19 pandemic seemingly in remission, people have begun to consider its lingering effects. Chief among these is the impact of remote work.
There can be little doubt that as workers are recalled, work from home will become less common than presently. But it will remain more prevalent than it was before the pandemic. Of particular interest is what the greater prevalence of remote work will do to people’s choices about where to live, and accordingly, to relative real estate values.
So far, the trend has helped the suburbs at the expense of the cities, and there’s reason to believe that adjustments will continue and, in time, reverse what is a more than a 100-year decline in small-town living.
There certainly are signs that remote work will remain much more common than in the pre-pandemic world. The Labor Department estimates that at least one-third of the working population, more than 50 million, can do their jobs remotely. Some private research puts that number higher.
According to a brace of surveys, approximately 73 percent of those doing remote work during the pandemic are happy with the arrangement. As many as 66 percent say they’re more productive. Perhaps more significantly, some 33 percent of employers have said that their firms will continue with remote work at least to some extent. Some 36 percent of managers have plans to reduce the number and size of their offices, and as many as 10 percent of managers plan to give up entirely on centralized work arrangements.
So far, the major effect of work from home has been a flight out of cities and into the suburbs. The national data is spotty, but private sources in New York City are indicative. A sampling of reports from major developers indicates that the average price of residential space fell more than 5 percent immediately after March 2020. And though buyer traffic has increased more than expected this year, prices have continued to fall, and are now more than
15 percent below pre-pandemic levels. Traffic from those planning to buy or lease commercial space is up about 10 percent so far this year, but levels remain some 36 percent below 2019. Outright sales of commercial property by some estimates are off 90 percent from 2019 levels.
The suburbs have seen the opposite trend. There, traffic and prices have risen dramatically. Here, too, data is spotty, but anecdotal reports of bidding wars in counties around the big cities are plentiful. The intensity of buying has abated since 2020 but has hardly disappeared. Sales rates are so high that the relative demand levels of available inventory, according to the National Association of Realtors, remain 60 percent below 2019 levels. The association also reports that the median suburban home price has risen 32 percent since the pandemic began.
Trends, however, don’t continue of their own accord, even when well established. Especially as the pandemic wanes, there’s every reason to expect that these pricing differentials will feed back into people’s decisions. As indicated, lower urban prices have already increased traffic in both residential and commercial spaces faster than expected. Evidently, there’s a powerful allure to city life. By contrast, the suburbs, appealing as they presently are, may see an end to their present special attraction. The rising cost of living in suburbia will cause many to rethink their initial decision to move and prompt others to cash in on the gains their property has enjoyed. At the same time, the availability of remote work will for some steal the need for proximity to urban centers that has long bolstered the appeal of suburbia.
A portion of these people, perhaps a large proportion, may, given the freedom offered by remote work, decide that they can get more for their money in small towns. Presently, little data exists on exurban as opposed to suburban real estate trends, but it stands to reason that people will begin to make this consideration.
The appeal of exurban living will only grow as the initial pioneers in this trend lure more upscale shops, dining, and other entertainments to Main Streets that until recently have had little such appeal. Fear of urban crime and the desire for control—of schools, for instance, and other municipal decisions—could reinforce the trend and bring a new vitality to places that for a century or more have been seen as declining backwaters.
