The Future of Real Estate
On the Downstream Effects of the Pandemic on the Housing Market
As we outined in this year’s Outlook, the downstream effects of the pandemic are starting to take shape, and they will continue to reshape consumer priorities and industries for years to come. The real estate market is no exception.
As people have adapted to new ways of living in this post-COVID era, their expectations and preferences for housing have also evolved. In tandem with broader economic incentives and lifestyle changes, such as the end of Zero Interest Rate Policies (ZIRP) and shifts in homeowner mindset, these evolving trends are driving significant changes in the real estate market.
New Mindset Towards Home Ownership
One of the most profound changes triggered by the pandemic has been the shift towards remote and hybrid work models. As companies adjusted to the realities of lockdowns and social distancing, many discovered that their employees could remain productive while working from home. According to a survey by the New York Times, around 20% of the US workforce has remained either fully remote or hybrid as of Q1 2024. On average, hybrid workers report coming into the office 2.6 days per week, per a 2023 Gallup survey.
This has led to a significant change in what constitutes a “good location” in real estate. Historically, proximity to urban centers and job hubs was paramount, driving up property values in cities and densely populated areas. However, as remote work became more entrenched, people realized they could live further away from their workplaces without compromising their professional responsibilities.
This newfound flexibility has led to a migration away from expensive urban centers to more affordable suburban and rural areas. For example, tech workers in San Francisco have been relocating to smaller cities like Boise, Idaho, where they can enjoy a higher quality of life at a lower cost. The demand for housing in these smaller cities has surged, leading to increased property values and a boom in local real estate markets.
Yet, this trend is not without its complexities. While remote work offers unprecedented flexibility, it also comes with challenges that are reshaping the housing market. The reality of working from home indefinitely has led some to realize the importance of a home that can double as a comfortable and productive workspace. This has increased demand for properties with dedicated home offices, outdoor spaces, and access to reliable internet — features that were once considered luxuries but are now seen as essential.
At the same time, remote work is influencing decisions beyond where to live; it is affecting when to buy. Younger generations, particularly Millennials and Generation Z, were already trending towards delaying homeownership, in tandem with them delaying marriage and having kids, if ever, for a variety of reasons. Faced with financial instability, mounting student debt, and a challenging job market, many young people find the prospect of buying a home increasingly out of reach, similar to their dream of retirement. Consequently, there is a growing acceptance of long-term renting as a viable alternative to homeownership.
This shift in mindset has led to a burgeoning demand for rental properties that offer the comforts of ownership — such as private outdoor areas, community amenities, and high-end finishes — without the long-term commitment. Developers are responding by creating rental communities that cater to these preferences, blending flexibility with the lifestyle benefits traditionally associated with owning a home.
That being said, Millennials are still buying houses! In fact, earlier this year, they officially surpassed baby boomers and became the largest group of home buyers at 38%, per a report by the National Association of Realtors (NAR). Interestingly, the report also found that nearly one out of three Gen Z buyers are single females, further disassociating home-ownership with conventional life milestones like marriage or child-rearing.
The Remixed City
As mobility solutions continue to evolve, particularly with the development of autonomous vehicles, there is potential for significant disruption in the real estate market. Autonomous vehicles could reduce the need for parking spaces, leading to a reimagining of urban landscapes where parking lots and garages are repurposed for residential or commercial use. This could also impact suburban areas, where longer commutes would no longer be a deterrent for homebuyers.
Cities like Phoenix, Arizona, are already seeing the early effects of this shift, with developers beginning to consider how autonomous vehicles will change the design and function of future housing developments. As these technologies become more widespread, we can expect to see further transformations in how cities are planned and how people choose where to live.
As more people move away from urban centers, they bring with them the demand for the amenities and conveniences they were accustomed to in the city. This shift is prompting a revival of suburban retail, with new shopping centers, restaurants, and entertainment venues being developed to cater to these growing populations. This trend not only supports local economies but also enhances the appeal of suburban living, further driving demand for housing in these areas.
Another significant trend shaping the housing market is the integration of smart infrastructure into urban planning. Advances in technology are enabling cities to become “smarter,” with infrastructure that can monitor and respond to the needs of residents in real-time. Smart grids, energy-efficient buildings, and responsive public transportation systems are just a few examples of how technology is being used to improve urban living conditions.
Cities like Singapore have been at the forefront of this movement, implementing smart city initiatives that enhance the quality of life for residents. As more cities adopt similar technologies, the demand for housing in these tech-enabled areas is likely to increase, attracting buyers and renters who prioritize sustainability and convenience.
Keeping the Community Spirit Alive
The pandemic has not only changed where people want to live but also how they want to live. The isolation caused by lockdowns and social distancing measures has brought the issue of loneliness to the forefront, leading many to prioritize living close to friends and family. This desire for connection is driving demand for housing in communities that foster a sense of belonging and social interaction.
At the same time, the increasingly divided political climate in many countries is influencing housing decisions. Americans lack trust and commonality in the places they live: 57% of people know only some of their neighbors, while 23% of people under 30 say they know none of their neighbors at all.
People are primarily doing this in two ways: joining a community-driven, co-owning housing solutions, or deliberately moving close to where their friends already live. For the former, one particularly inspiring example is Fractal in Brooklyn, NYC, led by Priya Rose. Fractal is described as a “decentralized network” where the group has creatively transformed an apartment building into a hub for community experiments, such as an “Improvised University” and co-working spaces for families with children. There are also examples of pop-up villages catering to digital nomads in global metropolises like Istanbul or Mexico City, organized by startups like Edge CIty and Zulalu.
Another newer trend that is gaining momentum is the development of branded residential communities. These are housing developments that are associated with well-known brands, such as Costco, Disney, or even luxury hotel chains. These communities offer residents a unique lifestyle experience, with amenities and services that reflect the brand’s identity and values.
For example, Disney has launched a series of master-planned communities called “Storyliving by Disney,” which aim to bring the company’s magic and storytelling into everyday life. These communities feature homes designed with Disney-inspired architecture, as well as entertainment and recreational options that align with the brand’s family-friendly image. Besides Disney, Costco also recently announced that an upcoming store in California will come with 800 residential units above it. As more companies explore this concept, we can expect to see a rise in branded residential communities that cater to specific consumer segments.
As we navigate this brave new world of homeownership, where tech giants and theme parks are just as likely to be your neighbors as they are your weekend destinations, one thing is clear: the rules of the real estate game are being rewritten. Whether you’re chasing the remote work dream in a pop-up village, or moving into a Disney-branded gated community, the future of real estate is anything but business as usual.
