The housing market came to a screeching halt in March 2020, when much of the nation shut down in response to the COVID-19 pandemic.
But the summer rebound, when many strict lockdown measures were lifted, was big and fast and revealed new homebuying patterns: Americans, many now used to working remotely, began buying farther away from some cities and traditional job centers.
Zillow found that nearly two million renters unable to afford homes in metro areas could now afford to buy farther out because they no longer had to commute to work.
During a U.S. Census Bureau Local Employment Dynamics Webinar earlier this year, economists from real estate firm Zillow showed how pairing Census Bureau data with Zillow data revealed the impact of the pandemic on housing market trends.
Among stats cited: the Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD), Origin-Destination Employment Statistics (LODES); the 2018 American Community Survey (ACS) 1-year estimates; and the Current Population Survey (CPS), sponsored jointly by the Census Bureau and the U.S. Bureau of Labor Statistics (BLS).
New for-sale housing inventory improved during the summer of 2020 but failed to keep up with sales growth. In 2020, there were fewer houses for sale (Zillow’s research data site) than in 2019, which created a home buying market with hyper-competitive conditions.
Even before the pandemic, 2020 was expected to be a big home-buying year because of the wave of millennials reaching home-buying age. More than 72 million were in their 40s, the prime age to buy a home.
Then COVID-19 happened and many of these millennials found themselves working from home. Zillow found that nearly two million renters unable to afford homes in metro areas could now afford to buy farther out because they no longer had to commute to work.
As a result, many renters became homebuyers and home and rental prices diverged around the time the pandemic hit the United States.
But lower-income households more likely to rent were also more likely to have experienced job loss in hard-hit industries, such as retail trade, accommodations and food services.
Those facing financial pressures turned to alternatives, including “doubling up” or moving back in with their families, according to Zillow research. That shift, in turn, added to a decline in rental demand.
Despite some concern that a pandemic-related mass exodus from metro areas was changing U.S. cities, cities are still very much alive and the housing market in some has even grown.
Zillow economists found pandemic’s impact on where people live varied across regions.
To clearly define urban and suburban, the Zillow Group used a ZIP code classification system for urban, suburban and rural areas. It then combined them with Census Bureau variables, such as population density, age of housing stock and other variables.
In cities in the Northeast and West regions like New York and San Francisco, home value growth trailed the suburbs but the opposite happened in markets in the Midwest. For example, home values surged the city in the Kansas City and Cleveland metro areas, where urban prices were relatively affordable.
Basically, it appears that people in larger, more expensive metros were not willing to pay premium prices for proximity to amenities that were no longer available during the pandemic, like restaurants, museums and theaters. But demand boomed in more affordable urban areas.
“It's important to call out the relationship between housing and jobs, and how intertwined these things are,’’ said Nicole Bachaud, a Zillow economic data analyst who presented during the Census Bureau webinar. “When an area gets an increase in jobs, people will move there to work putting pressure on the housing market, which will often result in an increase in prices.”
According to a Zillow survey, most people are willing to commute 30 minutes one way and placed a lot of importance on the proximity of their home to their work.
One surprising finding: Pre-pandemic remote workers were more likely to buy in urban areas.
In 20 of the top 35 largest markets, over half of urban workers were reverse commuters. More than 70% of urban residents work outside of urban areas in markets like Orlando, Tampa and Riverside, Calif., according to the survey.
Metros that had higher urban growth in 2020 had a bigger share of reverse commuters in 2017. A metro area’s share of reverse commuters can signal how it might fare during a pandemic because it reveals the slice of population willing and able to pay for and keep urban amenities.
The graph above also shows that reverse commuters are not specific to one generation. Both the younger and older generation have been staying in metro areas like Charlotte, N.C., San Jose, Calif., and Washington, D.C.
Some people will continue to live in urban areas even without workplace proximity ties, according to Zillow.
In 2019, Zillow surveyed recent homebuyers who worked remotely at least one day a week. The findings: The ability to work from home part-time shaped their housing decisions including whether to move to a different home or location and/or remodel their home.
Most home buyers make the choice of where to buy based on affordability, amenities and major life events such as a new job, growing family or older kids moving out, says Treh Manhertz, a Zillow economist.
The mass shift to remote work — even part-time — is now another factor in homebuyers’ decisions.
A May 2020 Zillow survey found that 75% of respondents working from home during the pandemic wanted to continue to telework at least half of the time even after workplaces reopen. If long-term remote work were possible, 66% of them said they’d consider moving.
Zillow also looked at renters in major U.S. metro areas who could afford to purchase a home outside of the metro areas, if allowed to telework.
Two million renters were on the tipping point – that is, earned enough to buy the typical U.S. starter home but not in their current metro location.
To estimate who can work remotely by industry and occupation, Zillow combined its data with ACS and BLS data. The combined data also provided the potential to examine teleworking by race.
Remote work has offered new housing options and inspired many to dream bigger and rethink where they see themselves living in the future.
Using ACS data, Zillow was able, for example, to identify vacation towns that have drawn teleworkers by looking at page views, favorites, “likes” and the number of times a visitor saved the URL of a vacation town’s website.
Combining page views and “for sale” listings, Zillow found that vacation homes were up 50% in August of 2020 compared to the same month in 2019.
Although these metrics do not necessarily confirm that viewers of the websites are moving to vacation towns, they are in line with a 66% growth in pending home sales in vacation towns, a sign that some buyers were indeed making their dreams a reality.
These examples can be found on Zillow.com/research, along with other ways Zillow and the Census Bureau partner to provide consumer research on housing.
Note: This story highlights analysis by Zillow economists featured in a recent U.S. Census Bureau webinar for data users. This analysis has not undergone statistical review and may not meet the Census Bureau’s quality standards.
Earlene K.P. Dowell is a program analyst in the Census Bureau’s Economic Management Division.