The option to work from home could open homeownership to people renting in expensive cities, according to a new Zillow analysis.
According to Zillow, nearly 2 million renters that have been priced out of their current metro could afford to purchase a typical US starter home elsewhere, if given a chance to work from home. These renter households make up 4.5% of all renter households nationwide.
In pricey coastal metros like San Francisco, 22% of renters priced out of their metro could afford an estimated $725 monthly payment on a typical starter home. Monthly payments on a San Francisco city starter home are more than seven times higher ($5,181). Over 10% of renters priced out of the Golden City could afford a home within the greater San Francisco metro area – offering more options for prospective buyers who no longer need to commute to the office.
"If remote work becomes a bona fide long-term option especially with the pandemic, that could reshape the US housing market by opening up homeownership to people renting in expensive parts of the country," said Zillow Economist Jeff Tucker.
Meanwhile, renters will find it more affordable to buy a home in the suburbs of cities like Minneapolis, Phoenix, and Denver than in the metro area. Other affordable cities such as Pittsburgh, El Paso, and Rochester, also offer more affordable starter homes than in the country as a whole.
"However, it's unclear how many people would make the move to buy their first home," Tucker said. "Proximity to work is just one of the factors people consider when choosing where to live. Other factors may keep them from moving, including proximity to friends and family, cultural and natural amenities, and their kids' schools."
Millennials may benefit the most from the new housing options, according to the report.
Despite the homeownership hurdles they face (rapid home price growth, home supply shortage, intense competition, and down payment), millennials who have the choice to work from home make up nearly half of the 1.92 million renter households who could afford homeownership.
"Two-thirds of our buyers are millennials," said Holly Mellstrom, a New York-based Zillow agent. "They're looking to put down roots and get more space for their money after high-rise city living."
Mellstrom said that many young families planning to move to the suburbs in the future are "making the move now because they don't have to anticipate having to commute into the city to work every day."