Today's Remote Worker, Tomorrow's Modern Nomad?
Reading through articles today, I came across one of interest that highlighted the takeaways from Redfin’s Chief Economist Daryl Fairweather. Fairweather authored a just released report titled, “Five Ways the Housing Market Will Change After the Pandemic.” He forecasts that the housing market will experience five primary changes as the pandemic subsides.
The first change that he predicts is that home values are going to grow at a much slower pace. He predicts that values will continue to grow, but will do so at around 5%. In our Sacramento region, values grew last year at a rate north of 17%. Fairweather cites the increase to mortgage rates as the primary culprit to the slowing buyer demand and thus slowing of home values. Over these past two weeks we have already experienced increases to mortgage rates as they went from the mid 2s to the high 2s. If we see a continuation of that trend, then I agree with Fairweather’s forecast of a slower pace for home values.
The second change is that more property owners will put their houses up for sale. Considering how few homes were available for sale last year, I feel like this is almost a no brainer. Inventory levels have no where else to go but up. I hope.
His third change is that there will be a significant increase of interest in the condo market. Area appraiser, Ryan Lundquist, recently did a blog in which he mentioned condos and how their rate of appreciation has been much slower over the past 12 months than the appreciation experienced by single family homes. Because condos have been lagging behind while single family homes have shot through the roof, it is easy to see why their comparatively low asking prices will become more and more appealing as the gap between themselves and single family homes increase. In addition to the more attractive pricing seen in the condo market, there also is more of a balance at the negotiating table between buyers and sellers than currently exists in the single family home market. Price and balance are two strong influences that should prove this prediction to be accurate.
The fourth change that Fairweather has predicted is that the suburbs will start to feel more like cities. I’m not sure what is meant by this. The article touches on a subsequent prediction that the suburbs will start to have more schools, parks, restaurants, coffee shops and bars. To that author, these elements make the suburbs more like a city. While I agree with that sentiment, here in our region the suburbs that surround the city core are already like this - and have been so long before the pandemic influenced buyers to move. In fact, Sacramento’s suburbs have proven themselves to be so much like cities over the past decades that several of them have actually become cities: Elk Grove, Rancho Cordova, and Citrus Heights. In short, our suburbs are already city-like and I don’t see the pandemic having had much influence over their make up here locally.
The fifth change is that rents will rise quickly, and especially so for short-term rentals. My first thought to this prediction was to remind myself that Fairweather is talking on a national level. Here in Sacramento, we’ve already been experiencing increases to rent rates and that has been going on for several years. I don’t think an even more rapid increase to current rent rates is reasonable. But the most interesting aspect of this particular change to real estate is that he feels short-term rentals will become especially popular. When I think of short-term rentals, I think of a vacation home in Tahoe, or a beach house in Capitola. Fairweather’s forecast for short-term rentals doesn’t have anything to do with those, but instead has to do with remote workers. He feels that remote workers will become modern day nomads. For a few months out of the year the remote worker will reside close to their company headquarters, and then for a few more months they will live close to a satellite office in a different state. And then for the remainder of the year, the modern nomad will travel from vacation destination to vacation destination living their best lives. Now I don’t doubt that there will be some people that can definitely take advantage of the lax working arrangements and travel more as a result. But the idea that so many people are going to take up this lifestyle that it will result in a significant impact to short-term rental rates is a little harder for me to get behind. In my opinion, moving your household from one home to the next is a serious pain in the behind. To willingly do that multiple times within a given year is wild to me. Clearly I’m not the target market.
In short, I agree with 3 of the predictions and am a little more skeptical of 2 of them. What do you think of these 5 changes which are forecast to occur once the pandemic ends? Do you agree? Disagree? Or maybe have a different outlook?