The Unassuming Economist

From a new work by John Mondragon (Federal Reserve Bank of San Francisco) and Johannes Wieland (UCSD and NBER):

“What explains record U.S. house price growth during the Covid-19 pandemic? We show that the shift to remote work explains over one half of the 23.8 percent national house price increase over this period. Using variation in remote work exposure across U.S. metropolitan areas we estimate that an additional percentage point of remote work causes a 0.90 percent increase in house prices after controlling for negative spillovers from migration. This cross-sectional estimate combined with the aggregate shift to remote work implies that remote work raised aggregate U.S. house prices by 14.6 percent. Using a model of remote work and location choice we argue that this estimate is a lower bound on the aggregate effect. Our results imply that the evolution of remote work is likely to have large effects on the future path of house prices and inflation.”