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60% of Price Surge Resulted from Remote Work

A Fed study found that every 1 percentage point increase in remote work resulted in about a 0.9 percentage point increase in housing prices.

NEW YORK – Research from the Federal Reserve Bank of San Francisco reveals that the shift to pandemic-era remote work led to house and rental price increases during that time – and it’s likely to drive costs and inflation up further as remote work becomes permanent.

In the two years ending in November 2021, house prices increased 24%, with more than 60% of that increase attributable to the rise in working from home during the pandemic.

The authors, who adjusted housing data to account for the migration from expensive cities to more affordable areas that occurred during the pandemic, found that each 1 percentage point increase in remote work results in about a 0.9 percentage point increase in house prices. The impact on rent prices has been identical.

“This suggests that the fundamentals of housing demand have changed, such that the persistence of remote work is likely to affect the future path of real estate prices and inflation,” say the study’s authors, Economists Augustus Kmetz and John Mondragon from the San Francisco Fed and Johannes Wieland from the University of California, San Diego.

Source: Bloomberg (09/26/22) Saraiva, Catarina

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