COVID-19’s Impacts on Housing Markets: Introduction (2024)

This special issue features papers on the short- and long-term impacts of the COVID-19 pandemic on housing markets. Beyond short-run effects associated with an economic downturn and contagion fears, policy interventions have had additional impacts, as have technology shifts associated with the pandemic. The papers in this volume describe these effects, using innovative data techniques to describe real time and longer run outcomes. One effect of the pandemic is an increase in the demand for housing associated first with the public health measures of the pandemic such as social distancing and quarantining, and then with the widespread adoption of work from home technology, spurred by the pandemic. This may be a lasting effect as some expansion in remote work is likely to persist, even as the pandemic passes, leaving transformed housing markets and changed residential location decisions. The unprecedented rises in housing prices and rents, due to work from home technology, along with fiscal and monetary policy interventions during the pandemic, have contributed to affordability declines reaching a 30-year low.

The immediate negative effect of the pandemic on economic output, as well as fears of ongoing declines, decreased housing demand. “Behavioral changes in the housing market before and after the Covid-19 lockdown,” by Andre Anundsen, Erling Røed Larsen, Leif Anders Thorsrud, and Bjørnar Kivedal, draws on daily transaction and hourly bidding data from Norway to identify how housing markets reacted to news of the pandemic, from the onset in the beginning of March 2020 to the March 12 lockdown, and the reopening on April 20, 2020. The authors find that prices fell immediately and that nearly half of the fall in prices occurred prior to the lockdown, an effect which was entirely reversed upon reopening. The article demonstrates the correlation between daily fluctuations in public sentiment and otherwise unexplained daily house price changes.

As the pandemic spread, so did fears of contagion which spurred demands for social distancing and moves to less dense living arrangements, often in outlying areas. The demand for increased living space may have been well founded, as showed by Ingrid Ellen, Sherry Glied and Renata Howland in “Demons of Density: Do Higher-Density Environments Put People at Greater Risk of Contagious Disease?”. Using a broad cross-section of Medicaid claims data, this article provides evidence that household size, and therefore crowding, correlates to increased hospitalization rates from COVID-19, while population density bears no such correlation. The evidence on this critical question for public health is that density in itself did not contribute to disease, but crowding did. Importantly, the authors also show that those experiencing housing instability and living in institutional settings experienced more severe disease.

Major housing market effects were associated with the pandemic. “Stuck at Home: Housing Demand During the COVID-19 Pandemic,” by James Graham, William Gamber, and Anirudh Yadav, shows how the pandemic resulted in a joint increase in the amount of time households spent at home as well as in their share of expenditures for at-home consumption. Drawing on data from across the United States, the authors demonstrate that these time and expenditure shifts were the result of the increased share of demand for goods consumed at home as well as for the home itself. Faster acceleration in housing prices is observed in those counties where households spent more time at home. A key finding is that nearly half of the increase in house prices in 2020 can be attributed to the stay-at-home demand phenomenon, while lower mortgage rates caused a one-third rise and government stimulus explained a proportionally smaller amount. The authors also show that while the increased demand largely stemmed from young households and first-time homebuyers, this same segment was crowded out from the market by the resulting increase in housing prices.

Such effects on housing prices were not unique to the U.S. market. Drawing on daily data on UK housing price listings, Baptiste Meunier, Jean-Charles Bricongne, and Sylvain Pouget analyze the supply-side mechanics of the housing market during the pandemic. In “Web Scraping Housing Prices in Real-time the Covid-19 Crisis in the UK,” the authors assess seller sentiment from fluctuating listing prices, match these data to transaction prices, and show how such web-scraped data can be used to nowcast housing prices. During the lockdown, sellers’ listing prices remained high relative to transaction prices, causing an initial freezing of the market due to the “wait-and-see” behavior of sellers, but the margin dropped quickly after lockdown ended and prices rose. They also show that post-lockdown listing prices declined in London but increased in outlying regions, effects which are consistent with longer run incentives to relocate to less expensive markets as demand rose with increased working from home.

While the aggregate data show a rise in house prices after the short period of economic downturn, economic distress continued to depress rents. “Landlords’ Rental Businesses Before and After the COVID-19 Pandemic: Evidence from National Cross-Site Survey,” by Elijah de la Campa and Vincent Reina, investigates how rents and landlord behavior changed during the pandemic. The paper uses a survey of several thousand rental property owners in US cities to determine the impact of the pandemic on landlords’ rent collection and business behavior. They show that yearly rent collection was down significantly throughout 2020 relative to 2019 and that an increasing number of owners had a large share of their portfolio behind on rent. Further, landlords granted payment extensions and forgave rent payments to a greater extent during the pandemic than previously, but also exercised disinvestment practices and greater rates of eviction, missed mortgage payments, and property sales. These changes disproportionately affected communities of color and pose an ongoing threat post-pandemic. The impact of Covid-19 on rental markets resulted in the adoption of several ameliorative policies including national eviction moratoria and the Emergency Rental Assistance Program, but these only partially mitigated the underlying stresses (Goodmanetal.2023).

Major policy interventions to assist the homeownership market, including federal government policies to aid the homeownership market, had immediate positive effects. These policies included a forbearance program, as well as monetary and fiscal expansion., which contributed to the substantial rise in housing prices. Using data from the forbearance program, “Single Borrower VS Co-Borrowers in the Pandemic: Evidence from Mortgage Forbearance and Performance,” by Laurie Goodman and Jun Zhu, analyzes how single and co-borrowers reacted to the forbearance program. They find that single borrowers were more likely than co-borrowers to opt for forbearance. As a result, forbearance provided greater assistance to single borrowers in overcoming delinquency status than co-borrowers. These findings add to the literature on the efficacy of quickly implemented policies to assist the owner-occupied market (Gerardietal.2022).

Migration to take advantage of work from home (WFH) technology and the lower cost of living arbitrage is a long run outcome of Covid-19. “Intercity Impacts of Work-from-Home with Both Remote and Non-Remote Workers,” by Jan Brueckner and S. Sayantani, shows the likely effects on the demand for housing. WFH enables employees to relocate to reduce commuting costs, making suburban residential locations more attractive, increasing population and housing prices in outlying areas (Brueckner, Kahn and Lin, 2021). When cities differ in productivity, a shift to WFH causes some workers to relocate from high-productivity cities to low-productivity cities with cheaper housing while maintaining their jobs in the origin city. When cities differ instead in amenities, this leads to the opposite relocation pattern, with some workers relocating from low-amenity to high-amenity cities despite their expensive housing, while keeping their original jobs. Bruecknerand Sayantani(2023) generalizes this two-city one-worker model by incorporating non-remote workers who must live in the city in which they work. In each scenario, the population relocation of non-remote workers is in the opposite direction to that of remote workers, mitigating overall outcomes. The paper also reviews recent empirical findings which provide evidence showing housing prices are rising faster in suburbs and remote locations then in center cities (Guptaetal., 2021; Bloomand Ramani,2021; and Althoffetal., 2021).

While these papers report early findings during and in the aftermath of the pandemic, they and others in the burgeoning literature imply longer run effects as well. WFH, along with continued development of supportive new technology will persist (Morrisetal.2021, Bloometal.2021, Wachter2022). While WFH expands the geographical range of location, the increase in the demand for housing associated with greater space needs and the inter- and intra-city demand increases raised housing prices. Hence, the significant rise in house prices and affordability pressures are not simply a bubble reversible with monetary policy tightening (Kmetzetal.2022, Grahametal.2023, Acolinand Wachter 2022).

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