At the onset of the pandemic, a common narrative was that the masses were hightailing it out of cities and heading to greener pastures. From historically low mortgage rates to having the freedom to work from anywhere, people were suddenly allowed to reevaluate where and how they wanted to live, laying the foundation for the “Great Migration” that countless real estate professionals capitalized on over the past two years.
Fast forward to today and a lot has changed. Buyers are competing for a constrained supply of homes and affordability has taken a turn for the worse. RISMedia spoke with several real estate and relocation experts to get their insights on what the future holds for buyer relocation patterns in the housing market’s current state.
“It’s a mixed bag in terms of how this may impact migration patterns now and into the future,” says Kate Reisinger, CRP, executive vice president, Member Services, Leading Real Estate Companies of the World®.
Lifestyle-Based House Hunting
The outbreak of the COVID-19 pandemic and the response by the federal government and employers catalyzed a renewed focus on family and lifestyle needs among buyers and homeowners.
According to a National Association of REALTORS® (NAR) report, buyers and sellers continued prioritizing family and lifestyle during their house-hunting process last year. Behind the quality of the neighborhood, NAR’s 2021 Profile of Home Buyers and Sellers indicated that the second-most important factor to buyers when choosing a neighborhood was the convenience to loved ones.
Reisinger doesn’t expect a significant deviation from that trend in the coming years, as remote work has continued to offer flexibility in the workforce.
“For some, it’s a great time to transition from that big home with a lot of acreage to a downsized property in the city,” she says. “Buyers see prices in many urban markets have normalized, so they are taking advantage of that to return to the city—or in some cases, to try it for the first time. We see others who moved into bedroom communities because of COVID and loved it, with some people now opting to move even further out.”
According to George Ratiu, manager of Economic Research at realtor.com®, many of the shifts in migration plans and housing preferences during the pandemic were undercurrents building for at least half a decade.
“A lot of young professionals found themselves in very expensive cities after ten years of building a career and still unable to purchase a home,” Ratiu says. “So, what we saw through the pandemic was an acceleration of a trend that already saw young professionals looking for more affordable houses in the suburbs.”
Donna Deaton, an office manager at RE/MAX Victory + Affiliates in Ohio, echoed similar sentiments, adding that persisting demand for more space will still influence buying decisions.
“I think many people have realized they like staycations more than they thought they did,” Deaton says, adding that the Liberty Township-based brokerage has seen a mix of buyers exiting the downtown Cincinnati area to head over to suburban markets.
“We will still see that because people have seen its advantage, but I’m also seeing some younger people coming in that still want the urban lifestyle,” Deaton adds.
A Different Market
While many of the migration trends of the past couple of years are likely to stick around, buyers that are continuing their home search have a few factors to contend with if they want to tap into the American dream.
Housing affordability is still one of the most prominent factors influencing buyers in the market, with lack of inventory adding another hurdle for people searching for listings in their price range.
Mortgage rates have climbed from historic lows in late 2020 to surpass 5% in recent weeks. This has added to the challenge for many aspiring buyers—particularly entry level and first-timers—who are being priced out of the market amid last year’s surge in home costs.
According to Ratiu, the widening affordability gap will play a part in many buyers’ decisions if they haven’t been squeezed out.
“I don’t see housing becoming affordable in the next six months or even in the next 24 months, so I think for a lot of homebuyers, the search for affordability will mean pushing out the boundaries of the city to find affordable housing,” he says.
Ratiu went on to say that he has seen a range of buyer and builder preferences leaning toward suburbs and small-to-mid-sized cities, with the latter seeking cheaper land on which to develop.
“When we look at a lot of the construction taking place now it’s farther out, in part, because in the last decade and a half {{builders}} focused on infill development near downtowns since the narrative was that everyone wanted to live there,” he says.
Remote work became a prominent aspect of the “new normal” of the pandemic, and many house hunters were able to break from the age-old tradition of living closer to where they worked. According to Matthew Gardner, chief economist at Windermere Real Estate, that trend could change as employers start calling workers back to offices.
“The return to work was supposed to have been decided by many companies more than a year ago, then the Delta variant came along and most businesses pushed that decision-making process back,” Gardner says. “They’ve really been kicking the can down the road for quite some time, however, slowly, we are starting to get some companies with hybrid plans”.
“Most of what I’ve heard as I’ve spoken to different CEOs is that they want to start to come back, but most of them seem to suggest that the work from home will be more of a hybrid model,” he says.
The hybrid workplace paradigm—people working in offices and at home—is quickly growing into a dominant model for several companies. According to a January 2022 Future Forum Pulse Survey, the percentage of people working in hybrid arrangements increased to 58% from 46% between May and November 2021.
In another Microsoft survey of more than 31,000 workers and leaders, more that 52% of people in leadership roles said their companies were likely to shift to a hybrid work model. The remaining portion said that their companies would bring workers back full time.
As companies implement hybrid work environments en masse, workers will still have opportunities to cast a wider net for their home searches, according to Ryan Carrell, director of Relocation and Client Services at Carpenter REALTORS® in Indiana.
Carell is also a board member of the Relocation Directors Council, an association of “recognized leaders in the relocation industry” nationwide.
“I think the shift out was much more dramatic than the shift in because I think a lot of people (will elect to work from home),” he says. “I think we will see people commute a greater distance for a shorter time in the office versus a relocation.”
Carrell also notes that business relocation and expansion have contributed to a long-term shift in where people can live. This has been evident in how tech giants like Google, Apple, Meta—formerly Facebook—have expanded their footprint into markets throughout the U.S.
“They are building headquarters in the highly desirable suburban markets versus a high rise downtown to be closer to the community where their people live,” he says. “If you’re Microsoft and Google and you have these large campuses that you’ve already committed to, bringing people back to those campuses is probably a high priority.”
Staying Prepared
While many of the relocation trends that took hold during the pandemic are likely to persist amid different market conditions, real estate professionals looking to stay productive will need to leverage their relationships.
“The two items that we are always coaching our agents on are communication and staying in touch with their sphere,” Carrell says. “We’ve been presented with some macroeconomic trends like inflation, but those will affect families differently. The only way the agent is going to know which one of those families will need them the most is to stay in contact with them.”
Carrell suggests that real estate professionals prioritize being proactive when reconnecting and interacting with their sphere, especially as the supply of homes in the market is still low.
“As the trends change and as buyer demand continues to remain strong, it’s the agents who can find inventory—finding listings that aren’t on the market—that will win,” he says. “Reach out to potential sellers who maybe haven’t thought about selling. If you educate and help them understand their equity position—it’s 50% higher than it was three years ago—all of a sudden, they might be motivated.”
It also doesn’t hurt to have a robust agent and broker network, according to Gordon Miles, president and COO of Berkshire Hathaway HomeServices Nevada, Arizona and California Properties.
Operating in Palm Springs and Southern California, along with Arizona and Nevada, he has witnessed the impact of outmigration from coastal markets to less expensive markets inland.
According to Miles, building and leveraging a network will also be an essential tool.
Miles says that first, REALTORS® should be networking and interfacing with those in transitioning areas on a regular basis. “The second part is just being aware of pricing and what’s going on, and being aware of the environment and trends happening in their local markets,” he adds.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com.
