According to Arch Mortgage Insurance Company [1] (Arch MI), a Greensboro, North Carolina based company offering risk management and financial products to mortgage lenders, 2022 was nothing short of an amazing year for the housing market. Home prices rose at an unprecedented pace, while Seemingly every index rose across the board, even in light of record-low inventory.
That’s not to say 2021 was a walk in the park either. Supply constraints due to the pandemic continued to put pressure on the market, as did inflation, which became an increasing concern in the third quarter.
But according to Arch MI’s Housing and Mortgage Market Review [2] (HaMMR), which is a quarterly report that presents and analyzes key economic data, provides housing sector forecasts, and predicts long-term trends, housing demand will remain strong throughout 2022, supported by a wave of Millennials who are entering their prime homebuying years, strong Wage growth, and the persistence of remote work.
One of the most significant outcomes of the pandemic was the wide adaptation of remote work across essentially every industry.
“At the beginning of the pandemic, this flexibility Caused many suburban markets outside of large Cities to swell with renters looking for more space,” said Parker Ross, the SVP and Senior Economist for Arch Capital Services LLC and author of the report. “In the nearly two years since the pandemic started, working from home has become an expected job arrangement. According to Pew Research, More than half of employed adults working from home because of the pandemic would prefer to work from home all or most of the time even after the pandemic ends.”
Given the Constraints and difficulty companies have had hiring workers over the last two years, employers have greatly increased the amount of remote jobs that are available; according to LinkedIn, the percentage of remote positions posted to its site increased from 1.9% at the start of the pandemic to 16.3% in August 2021.
The shift to remote work was so large that the U.S. Bureau of Labor statistics added several questions to their Current Population Survey to help gauge the effects of the pandemic on the labor market. The questions, which started in May 2020, 36% of all workers indicated they had worked from home because of the pandemic.
While workers are beginning to return to the office, remote work remained elevated at 43% in December 2021.
So has working from home reshaped the housing market? All signs Point to yes.
“[Working from home] has enabled those who are able to work from home on a part-time or hybrid basis to move slightly farther away from job centers,” Ross said. “Dual-income households may be less inclined to venture farther away from job centers than single workers particularly if one of the workers in the household is required to commute into the office part-time. For workers who secure full-time remote jobs, their place of residence will be determined by affordability and personal preferences.”
Nationally, office jobs account for about 22% of the workforce. Prevailing data from the HaMMR report shows workers have taken advantage of the flexibility to work remotely and moved to metro areas that traditionally have fewer workers. Additionally, an increase in retirements during the pandemic, likely from workers who were near retirement age that did not want to work in a pandemic environment, has also likely driven some of the migration away from traditional job centers.
“Housing affordability constraints are typically not as great a concern for migrating workers and relocating retirees, as office-using employees typically earn higher incomes than their non-office peers and retirees generally have meaningful savings that enable them to purchase homes entirely with cash,” Ross said. “We expect these trends to be key drivers of housing demand in the years ahead, particularly for some popular destination markets, given the rising share of remote job postings and the incoming wave of retirements due to the aging Baby-Boomer population. The resulting impact for homeprice appreciation will be less noticeable for the broader national market and should instead continue to be concentrated in select regional market.
In addition, Parker Ross, HaMMR’s author and Arch’s Chief Economist, will host a Housing Update Webinar on March 3 at 2 p.m. ET, covering the main HaMMR points and offering his perspective on the direction of the U.S. housing market. Registration is available at archmi.com/hammr [3]. The event is free, but participants are limited.