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As remote work explodes, workers flock to second cities

(BIG DATA) As remote working becomes more normalized, workers are choosing where they want to live, so second cities are changing the landscape.

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Fall leaves on a white and red house, living in second cities

Over the summer I had to move out of the SF Bay, my home and a famously high-rent hotspot. Life there had never been cheap, but the economic crash at the start of the year had made it nearly impossible to stay. (Not to mention the yearly wildfires were pretty inconvenient.)

It’s strange to admit, but going to a suburb on the other side of the country was easier than trying to continue living in my home city.

I’m not alone in feeling that way. Plenty of other workers in the digital sector are making the same choice, leading to the emergence of ”second cities” where predominantly white-collar workers have been moving to comfortably work from home.

Remote work has evolved from a once-privileged exception to practically being a hot business trend, and the merits have been widely embraced across industries where remote work is possible. In a study performed by UK employment firm Robert Walters, 86% of employers across 31 countries replied that they intend to keep their remote workforce in some capacity. In other words, the second city is here to stay.

Economics lecturer Michel Serafinelli suggested to The Guardian that cities will become less congested, high costs of living will begin to balance out, and skilled workers will be more widely distributed as a result of this transition.

Minnesota is one state that’s counting on these “second cities” to continue flourishing. By investing high speed broadband infrastructure, it hopes to attract wayward telecommuters to come live there and boost GDP.

So the flight from metropolis seems bound to continue, at least among certain workers. Based on 2018 statistics from the US Bureau of Labour, Black and Hispanic men in particular disproportionately work in the service sector, where just 1% of jobs can be performed remotely.

2020 has marked a major turning point for the US housing economy. In areas like New York, Seattle, San Francisco, and Los Angeles, residents have protested unaffordable rent for decades. Yet gentrification has slowly but relentlessly escalated, driving costs-of-living sky high and displacing long-term local residents. California has actually been slowly losing residents to this process over the last four years, saying goodbye to just under 200,000 in 2018 alone according to MSNBC.

Bloomberg City Lab breaks it down like this: “From the Bay Area and Los Angeles, Phoenix and Las Vegas are typically the most popular destinations. And New Yorkers showed a tendency to move to Florida — a state that had 22,000 more users looking to move there in the third quarter than leave.”

The effect is so dramatic, it may have had an impact on this year’s election results.

In other words, these second cities aren’t exactly new. And if this year is any indication, they are only going to grow in influence in the future.

Desmond Meagley is an award-winning writer, graphic artist and cultural commentator in D.C. A proud YR Media alumn, Desmond's writing and illustrations have been featured in the SF Chronicle, HuffPost, Teen Vogue, The Daily Cal, and NPR among others. In their spare time, Desmond enjoys vegetarian cooking and vigorous bike rides.

Real Estate Big Data

NAR Chief Economist predicts housing market uncertainty

(BIG DATA) Warning bells on the housing market have been ringing for over a year. While this prediction isn’t a surprise, it’s disappointing news.

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Multitude of colorful homes representing housing market.

The housing market is booming. Many experts are concerned about another bust like we experienced in 2008, but the conditions are much different today. Homeowners aren’t extended like they were when the market crashed in 2008. National Association of Realtors® Chief Economist Lawrence Yun suggests that the housing market is still uncertain, even though he says, “housing kept the economy afloat” during the pandemic.

What is impacting the housing market? 

Yun cites record-low inventory and inflation as “curveballs” to the housing market. Many economists, including Yun, have been concerned about low inventory for many years, especially in certain markets. Even though builders are working hard to construct new residences, supply chain and labor issues are not accelerating the process.

Yun is more concerned about inflation impacting the housing market. He says,

“wages have risen by 6% from one year ago…but inflation is 8.5%.”

Rising mortgage rates have made mortgages cost $300 to $400 a month more, according to Yun. Many working families can’t afford that. Yun predicts inflation is going to be high for several months. The market will slow as the Federal Reserve raises rates.

Yun also cites the Russia-Ukraine war as another contribution to the uncertainty of the market. The war is also driving inflation, not just overseas, but in the United States. With gas prices climbing higher each week, this is impacting the housing market.

Is real estate a good investment in this market?

Last year, when Yun opened the Residential Economic Issues & Trends Forum at NAR’s annual REALTOR® Conference & Expo in San Diego, he expected the “housing sector’s success to continue,” but he did suggest that 2022’s performance wouldn’t exceed 2021s.

“Rising rents will continue to place upward pressures on inflation,” he said. “Nevertheless, real estate is a great hedge against inflation.”

There’s a lot we don’t know about the future. It’s disappointing to think that the housing market may be uncertain, but real estate is still a good investment.

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Real Estate Big Data

Housing starts stagnate, market conditions are rapidly shifting

Housing starts for April stagnated, marking the second consecutive months of declines, and more renters being left out of this shifting market.

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construction home growth housing starts

Housing starts stagnated in April, down 0.2% from the prior month, according to the U.S. Commerce Department.

The sentiment appears to be that although this marks the second straight month of dips, most are seeing today’s news as a positive, especially as construction of new homes was expected to fall 2.4% in April.

Further, housing starts are up 14.6% from April of last year, driven primarily by multifamily construction.

But it’s worth not getting overly excited, given that permits dipped 3.2% in April which is a forward-looking indicator, so expect starts to continue cooling in a time where we quite need the inventory.

Demand for housing inventory remains high, but the National Association of Home Builders reports today that confidence in the single-family housing market fell dramatically in May, marking the lowest level in two years.

Dr. Lawrence Yun, Chief Economist at the National Association of Realtors said in a statement, “The worst of the housing shortage is ending, but market equilibrium between supply and demand is still some ways off.”

He notes that as mortgage rates increase, builders “are chasing rising rents, with fewer homebuyers and more renters being forced to renew their leases,” noting that even prior to the interest rate increases, rents were rapidly rising and vacancy rates rapidly declining.

Pointing to another market shift, Dr. Yun notes that “Some degree of a return to the office is also fueling back-to-city living where high rises are concentrated.”

That’s a problem.

“Even as home sales look to trend back to pre-pandemic levels after the big surge of the past two years,” concludes Dr. Yun, “inventory will not return to pre-pandemic conditions. That means home prices will get pushed even higher in the upcoming months, albeit modestly, given the supply-demand imbalance.”

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Real Estate Big Data

Home prices jump double digits in majority of American metros [report]

(REAL ESTATE) Housing affordability was already a widespread challenge before current economic pressures were applied, but now home prices are skyrocketing.

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homeownership home prices

As home sales slide and mortgage rates rise, home prices in 70% of 185 measured metros saw a double digit annual increase in Q1, according to the newest data from the National Association of Realtors (NAR), up from 66% in the previous quarter.

The Southern region accounted for 45% of home sales in Q1, and experienced a 20.1% increase in annual home prices (compared to 14.3% just the quarter prior). Home prices in the Midwest jumped 8.5% annually in Q1, while The Northeast rose 6.7%, and the West increased 5.9%.

The median sales price of a single family existing home has now hit an astonishing $368,200.

“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022,” said NAR Chief Economist, Dr. Lawrence Yun. “Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”

Yun expects supply levels to improve, and for “more pullback in housing demand as mortgage rates take a heavier toll on affordability,” given that “there are no indications that rates will ease anytime soon.”

At first blush, price appreciation sounds lovely to anyone that owns a home, given that it is the largest investment most Americans will ever make.

But regarding today’s report, several homeowners told us that they now feel trapped, and that if they sold their current home, even if they purchased a new house at that same price, they would likely have to downgrade.

Affordability is an ongoing problem weighing down the housing sector. NAR reports that the monthly mortgage payment on a typical existing single-family home with a 20% down payment rose to $1,383 (up $319, or 30%, from one year ago). Families now typically spend 18.7% of their income on mortgage payments (but only spent 14.2% one year ago).

“Declining affordability is always the most problematic to first-time buyers, who have no home to leverage, and it remains challenging for moderate-income potential buyers, as well,” Dr. Yun observed.

Map of how home prices are behaving nationally

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