Housing Demand and Remote Work

We show that the shift to remote work explains over one-half of the 18.9 percent increase in U.S. real house prices from 2019 to 2023. Using variation in remote work exposure across metropolitan areas, we estimate that an additional percentage point of remote work causes a 0.92 percent increase in house prices after controlling for spillovers from migration. This finding reflects an increase in demand for home space: remote work causes an increase in residential rents, a decline in commercial rents, and a greater increase in prices for larger homes. The cross-sectional effect on house prices combined with the aggregate shift to remote work implies that remote work raised real house prices by 11.9 percent. We show that our cross-sectional estimate is a sufficient statistic for extrapolation to the true aggregate effect in a wide class of models. Our results argue for a fundamentals-based explanation for the recent increases in housing costs over speculation or financial factors, and introduce an empirical solution to the aggregation problem of cross-sectional estimates when it is possible to control for spillovers.