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The Household Mystery: Part II

Today, in the Calculated Risk Real Estate Newsletter: The Household Mystery: Part II

Brief excerpt: Recently there have been two papers that shed some light on this mystery.

From SF Fed economist John A. Mondragon and Professor Johannes Wieland: Housing Demand and Remote Work. The authors showed that areas with more work from home (WFH) saw larger house price increases.In this paper we show that the shift to remote work caused a large increase in housing demand. In turn, this increase in housing demand caused house prices and rents to increase sharply. Based on our cross-sectional estimates controlling for migration spillovers, we argue that remote work accounts for at least one half of the 24% increase in house prices from December 2019 to November 2021.
emphasis added ©Mondragon and Wieland
And from Federal Reserve economists Daniel García and Andrew Paciorek: The Remarkable Recent Rebound in Household Formation and the Prospects for Future Housing DemandThis note updates our previous work on household formation and living arrangements from the summer of 2020. At that early stage in the pandemic, the data showed a dramatic decline in headship rates as millions of Americans changed their living arrangements, many by remaining with or moving back in with parents and older relatives. …

In contrast, over the past year and a half there has been a remarkable rebound in the headship rate, driven in large part by a return to the pre-pandemic rates at which younger adults lived with parents or older family members. This rebound has been an important contributor to a huge increase in housing demand.Putting these two papers together – it is very possible that work-from-home drove some of the likely sources of household formation over the last 18 months. You can subscribe at https://calculatedrisk.substack.com/.

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