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More than three years after the pandemic shifted workplaces from office buildings to private residences, the work-from-home phenomenon continues to be a factor in the Midpeninsula housing market.
According to a number of local Realtors, it’s likely to be a factor for many seasons to come.
Before spring 2020, distance from workplaces was a major consideration for prospective homebuyers looking for well-located homes in Midpeninsula cities with short commutes. The pandemic-induced remote working arrangements, however, knocked commuting concerns far down the priority list after the first shelter-in-place orders went into effect throughout the region in March 2020.
The work-from-home phenomenon has finally begun to shift, but only on a limited basis.
“We certainly have seen some employers insist their workers return to the office, but not necessarily five days a week … and not necessarily everyone,” said Realtor Denise Welsh, who works in the Los Altos office of Compass Real Estate.
Welsh said she doesn’t hear about commute distances as a big priority for clients the way it used to be. Instead, they often are taking new remote and hybrid workplace realities into account. This has changed the parameters for many things that buyers value in a property, such as location, square footage or lot size.
“I have found that a lot of people are thinking they will either continue working from home, or might have to return to working from home again in the future,” she said. “I advise my clients to be very open-minded and realistic about their needs today, and into the future.”
Having workplace flexibility has become a common desire locally and nationally, according to a recent survey by Randstad, a provider of human resources services. It found that 61% of respondents would not accept a job they felt would adversely affect their work-life balance.
Many employers and employees expect hybrid work to become a permanent fixture, especially in cities with a lot of tech jobs that provide more remote work opportunities, according to a September 2022 study published by the Federal Reserve Bank of San Francisco.
The “Remote Work and Housing Demand” study showed that 30% of work across the United States was still being done at home in August 2022.
The persistence of remote work is likely to affect the future path of real estate prices, according to the study, which concludes that the growth of remote work didn’t just spur homebuying, but boosted home prices through much of the pandemic as the imbalance between supply and demand worsened in many markets.
According to the study, the shift to remote work accounted for 60% of the U.S. home-price surge during the pandemic.
“Working from home may increase a worker’s housing demand, because activities that used to be done in offices now take up space and time at home,” according to the report.
Nicholas French, a Los Altos Realtor for Sereno Group, said in the first year or two of the pandemic, the Peninsula market saw increased buyer interest in more outlying communities like Saratoga, and the opposite in more centrally located established cities like Palo Alto. Local agents reported sales of multimillion-dollar homes reaching record levels in some neighborhoods in Woodside, Los Altos Hills and Atherton, where larger lots could provide more privacy, living space and room following the shift to working from home.
Brian Chancellor, a Palo Alto Realtor at Sereno Group, said he anticipates buyer interest in larger properties with plenty of room to accommodate home offices — as well as exercise and entertainment facilities — will remain strong in outlying communities like Atherton, Woodside and Portola Valley. He noted sales earlier this year in Atherton in the $14 million to $16 million range.
He believes that current hybrid work trends will decrease activity in more far-flung locales beyond the Bay Area that were red-hot among local workers in 2021.
“I think interest in secondary markets like Lake Tahoe will be hurt by what’s going on now,” Chancellor said.
Work-from-home also impacted the local rental market. French said the Midpeninsula rental home market was hard hit early in the pandemic, with some areas seeing rents plummet as much as 20% as workers no longer needing to live near their office moved back in with family or to cheaper housing markets.
“Rents may not have returned to pre-pandemic levels, but we are definitely seeing an increase now compared to the early COVID years,” French said.
French said, however, he cautions prospective buyers and renters not to assume recent market trends won’t shift, or at least be modified by social and economic forces.
Just an Observation,
Remote work in fact makes living in Mountain View unnecessary, and actually is causing a significant drop in demand for housing, at the WORST time. So many new units coming online are going to flood the supply, and cause a dramatic drop in prices because demand is so low.
The reality is that so many business lost so much, and they are not going to recover back to the state they were prior to the pandemic. The pandemic did accelerate the process however, due to the developing functionality of remote work.
Face the facts everyone, things are never going to be normal again here. I find it incredible that so many are saying once the new housing is built, they will be sold or rented. Given the current situation, there is going to be a lot of vacancies, and the current market is still showing a dramatic drop in demand here.
The housing-market doomsayers and crashmongers have been wrong, are wrong, and will continue to be wrong.
Housing markets vary by location. Locally we have not seen much corporate ownership of single family homes, unlike many areas of the South where everything tends to be snapped up by corporate buyers paying all cash at above market prices.
One thing that could change is that corporate buyers of homes could become more active here. They could fill in for all the Google buyers who also paid sellers very well. The driver for Google employment in the area seems to be online Ad revenue, which has started a marked decline. Will it continue? Well, we can for sure say that the past over abundance of such ad revenue floating Google’s boat is “not guaranteed”. The whole Google thing could fizzle. The Googler wealth is not just created by merely being employed but it is in all the excess compensation that has been received by those that are empolyed. Reduce growth in hiring may not be as important as lower salaries and benefit expenses directed at those who work for Google. Like the free food and so forth. Living expenses are less when you get 2 meals or 3 meals a day provided by your employer, particularly if the workers don’t have families.
Locally we have already seen some decline in single family home prices from the heights of the pandemic. For whatever reason things went up unexpectedly then. A lot of the housing investment locally is not in purchases of the existing homes or the the construction of distinct new homes, but instead in a large investment by buyers in customizing and expanding the home they do purchase. Will that decline? It seems like that would go first before prices would fall too much.
I believe that we need more homes built to meet the growing demand for housing. The decline in single-family home prices is a good opportunity for developers to build more affordable homes for the middle-class and working-class families in the area. While corporate buyers may be active in other areas, we should encourage them to invest in building homes in our city to meet the housing needs of our community.
The fluctuations in Google’s employment and ad revenue should not be the only factor in determining the housing market in our city. We need to focus on building homes that are affordable for all members of our community, including those who may not work for tech companies like Google. As the pandemic has shown, it’s essential to have a diverse and resilient economy, and affordable housing is a critical component of that.
Investment in customizing and expanding homes can be a positive trend, but we also need to ensure that new homes are built to meet the needs of the community. Building more homes will not only address the current housing shortage but also create jobs and boost the local economy. Therefore, I urge our local government to encourage and incentivize developers to build more affordable homes and create policies that support the development of new housing projects in our city.
No one can build more single family homes locally due to the available land being zoned for multi tenant buildings. There’s a limited capacity to afford single family homes but loads of new apartments are in the pipeline. What’s going to be interesting is to see if those apartments see large vacancy rates due to the budgets of Googlers going forward, as there are fewer of them and they have less to spend.
I see your point about the limited availability of land for single-family homes in our city. However, I still believe that building more homes, whether they are apartments or multi-tenant buildings, can help address the housing shortage in our city.
While it’s true that the budgets of Googlers may be impacted by changes in the company’s growth and compensation policies, it’s essential to remember that there are many other people in our city who need affordable housing. The pandemic has shown that housing insecurity affects people from all walks of life, and we need to prioritize creating affordable housing for everyone, not just those who work for tech companies.
Moreover, new apartments and multi-tenant buildings can be designed to accommodate families and provide amenities that are essential for a comfortable living experience. It’s important to ensure that these buildings are built with the needs of the community in mind and are accessible and affordable for people of all income levels.
In short, while there may be uncertainty regarding the budgets of Googlers and their impact on the rental market, we need to focus on building more affordable housing for all members of our community, including families and individuals who may not work for tech companies.