Work from Home Impact on Real Estate
With the COVID-19 pandemic still ravaging populations, economies, and industries across the world, things have changed drastically. One of the few workable solutions most businesses have developed in response is to shift most of their on-site workforce online. Remote working may not have been as viable only a decade ago when internet penetration, cloud technologies, internet security, and connected devices weren’t advanced as they were today.
But given the technological advancements over the years, coupled with better infrastructures and service delivery, virtually anyone who has internet access can theoretically work from home. It has more far-reaching effects as well, especially in influencing buyer behavior in the real estate industry.
How Remote Working Is Changing Home Buying Behavior
Remote working has been beneficial to businesses in terms of reducing fixed costs like rent, heating, electricity, and many other expenses they would incur with all of their on-site staff. This is a particularly welcome relief at a time when profit margins are shrinking and sales are dropping. But one aspect that many businesses are overlooking is how this mass-movement towards remote working may actually be altering consumer behavior in various industries. Such change is of particular interest in home buying behavior.
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Given the scale and probable long-term outlook of COVID-19 in 2020, remote working might become a more permanent addition to the professional landscape. As such, it is changing remote employees’ approach to renting living space, choosing suitable locations, and other long-term decisions. This blog explores this massive shift to remote working, and what it means for real estate firms and mortgage recruiters. Read on for more.
More First-Time Buyers Open to Purchasing Homes
In the United States, urban or metro centers are usually the hub of commercial activities. Major cities such as San Francisco, Los Angeles, and New York are business centers housing world-class industries. Of course, these industries have a high demand for talent and technical skills. This attracts workers, not just locally, but from across the globe. Unfortunately, while these cities are major business hubs, they also come with the downside of extremely high living costs. Workers who rent living space are looking to find someplace in the city center as close to their work as possible. Hour-long commutes, either way, are exhausting when done 5 times a week, but were considered a necessity.
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However, the COVID-19 pandemic and the resulting work-from-home shift has prompted many renters to reassess their situation. Since many don’t need to be physically present in the office anymore, they don’t need to rent expensive space in a metro area anymore. A significant percentage of renters in metro areas cannot afford to buy housing in those areas. But lower housing costs in suburban areas are much more realistic. This is leading to a progressively growing number of first-time buyers in the market looking for a good deal.
Reversing the Urban Migration Phenomenon
We’ve already talked about how major urban centers become commercial and economic hubs. Even as far back as the dawn of the Industrial Age, these centers have attracted workers in search of jobs and livelihood.
Over the many years since then, this phenomenon known as urban migration has continued. It has even expanded beyond state or federal borders. Given easier travel and immigration laws, businesses have been able to attract talent on a global scale. However, as mentioned, the primary reason to live in a city center for workers is to be near their place of employment.
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With a large working population, this has attracted more and more people to urban areas and driven up the costs of housing and living. At the same time, however, the standard of living does not always correspond to living costs. This is particularly apparent when workers realize they don’t need to live in urban centers when working remotely.
With more buyers entering the market for suburban homes, the urban migration phenomenon is not just slowing down, but actually reversing. This promises to be a transformational movement in the American housing industry. As more people begin to shift towards suburbs for the cleaner air, better schools, and lower crime rates, the demand for real estate and housing will go up. This may see land value in such areas appreciate over the coming years.
Changing Home Requirements for Buyers
Everyone has a vague idea of their dream home and the houses they buy imitate this idea in one way or another. You’ve probably heard people look for homes with jacuzzis, pools, basements, and so forth. With COVID-19 and remote working in place, most workers now have a very specific requirement when shopping for a new home. They need a dedicated space to work remotely.
This is a very fair need, given the difficulty of maintaining productivity and morale when working from home. It also keeps them insulated from distractions by other members of their home, such as young children or pets. Real estate agents now often get specific questions about extra bedrooms or a study that can easily be adapted to a home office.
Zero-Interest Rates Have Increased Mortgage Applications
In an effort to jump start and stimulate the lagging US economy, the Federal Reserve announced that it was slashing interest rates to zero earlier this year. This zero-interest makes borrowing dramatically cheaper all the way up to 2022. For many people, it represents a rare opportunity to save significant money when borrowing funds to buy a home. As a result, mortgage firms everywhere are seeing a massive spike in new loan applications. The volume of applications has been so significant that nearly every staffing agency has its hands full sourcing and delivering experienced talent to mortgage firms. This may well prove to be a measure that can shore-up the shrinking economy and inject much-needed funds into circulation.