How remote work is reshaping the local housing market

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.