- As COVID-19 cases level off, more companies are bringing workers back to the office.
- That could change home buyers' priorities and put pressure on certain markets.
In-person work could present new challenges to home buyers.
To say that 2022 is a tough time to be a home buyer would be a pretty reasonable understatement. Right now, buyers are grappling with limited housing inventory and inflated home prices. And rising mortgage rates aren't helping matters.
But there's another factor at play that could make life difficult for new home buyers this year -- a broad return to in-person work. Here's why.
It's all about evolving demand
Currently, housing inventory is low and the demand for homes is generally high. But as more and more companies put an end to remote work and insist employees show up to the office, the demand for commuter-friendly homes might skyrocket, making certain neighborhoods even pricier for new buyers looking to break in.
Regis Hadiaris, VP of Product Strategy for Rocket Central, is more than familiar with this notion. "During the pandemic," he explains, "a shift occurred in buyers' values. In 2021, the quality of a neighborhood became the most important factor to buyers when choosing a place to live, surpassing proximity to a job, which ranked higher in 2020."
"As Americans return to the office," he continues, "or to hybrid schedules, these personal preferences will be a bigger driver of where buyers decide to live -- whether urban or suburban."
Now it's easy to assume a return to the office will spark an uptick in demand for urban homes more so than suburban homes. But that may not end up being the case.
During the pandemic, many people started to appreciate the value of added living space. And so buyers may, in the coming months, lean toward commuter-friendly suburban homes with more square footage than cramped urban homes.
While some suburbs don't offer great access to nearby cities, others have better rail and bus networks that make it easy to commute to business hubs. But home buyers who seek out those specific neighborhoods could face a world of competition.
New buyers might end up with a big disadvantage in these situations. In the absence of existing home equity to tap, they might easily get outbid on the limited number of existing homes that lend to an efficient commute.
Mortgage rates may be less of a factor
Mortgage rates have risen sharply this year, and there's reason to believe they'll continue to climb in light of the Federal Reserve's plans to raise its federal funds rate. But Hadiaris doesn't necessarily think that will drive new buyers away.
"While mortgage rates are a factor in buying a home," he says, "Rocket Mortgage found that rates are more important to repeat home buyers than first-time buyers. Even with mortgage rates rising and many going back to the office, these factors aren't decreasing buyers' desire to purchase in their preferred neighborhood."
Higher home prices, on the other hand, could deter first-time buyers. "In March 2022, 48% of house listings sold over asking price," says Hadiaris. "This will most likely continue to rise as we move into the spring and summer."
New buyers may be willing to take on higher borrowing costs to purchase homes in their desired neighborhoods. But whether they can afford to outbid seasoned homeowners is a different story.
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