Remote Work and Affordability Drive Generational Shifts in Home Buying

Affordability and cost-of-living are driving remarkable population shifts southward and to rural areas even as they keep more millennials from the home-buying market.

Strong economies in Texas and California have made these states top destinations for work-related moves for the past five years, according to the Magnet States Report by Allied Van Lines and Zillow. Companies such as Tesla, Oracle, and Charles Schwab join an already large workforce in moving operations to Texas, citing lower cost of living and no corporate income tax, according to the Austin Business Journal. According to Forbes, California continues to be a magnet for small businesses due to its highly skilled and educated workforce and a solid customer base. 

Moving toward affordability

The majority of moves annually are from one suburban zip code to another suburban zip code since that is where the vast majority of housing inventory is found. But according to the data gathered by Allied Van Lines and Zillow, the pandemic appears to have created a substantial move away from zip codes with higher priced homes toward those with more affordability. The result is demonstrated in an exurban migration from urban and suburban population centers into rural areas.

In 2021, there were 54% more moves from suburban to rural areas than vice versa. Similarly, there were more than 50% more moves from urban to rural areas than from rural to urban. 

A move from a suburban environment to a rural setting meant a drop of $128,000 in average housing cost. That difference was more than $158,000 for those moving from urban to rural areas. “The combination of rapidly rising home values and more available remote-working jobs has pushed people to seek out parts of the country where their home-buying dollar goes further,” says Zillow senior economist Jeff Tucker. “We can see they are moving to zip codes that are more affordable than where they came from.”

This is a distinct shift from housing trends prior to the pandemic. Across all interstate moves in 2021, people were moving to zip codes where homes were about $35,800 cheaper than where they came from. For each year between 2016 and 2019, the average ZIP-level price change was a decrease of less than $7,500. “By combining our moving trend data with housing data from Zillow, we can provide more robust insights into how people are moving and the importance of housing affordability,” said Steven McKenna, vice president, and general manager for Allied. 

From the given data, it is difficult to discern precisely how many are saving money on the move and how many are seeking out more affordable areas to buy larger homes. According to Zillow Consumer Housing Trends Report 2021, the most common life event buyers cited for moving was a change in their household or family size (42%), followed by working remotely more often (30%) and a new job or job transfer (28%). 

Recent data from the U.S. Census Bureau’s Vintage 2021 national and state population estimates suggest large northern cities. New York’s declining population in the last year was predominately due to negative domestic migration of -352,185. Over the past year, the District of Columbia’s population declined by 2.9%, with net domestic migration outpacing positive numbers in both natural increase and net international migration. 

First-time homebuyers are losing in a competitive market 

Despite a substantial millennial generation coming into its peak home-buying years, young buyers make up a smaller share of the market than in previous years. Soaring housing costs, student debt, and increasing competition from their parents and grandparents generation all play a role. 

The share of buyers making their first home purchase has declined over the past four years from 46% in 2018 to just 37% in 2021. According to Zillow, U.S. home values grew 31.2% from 2009 to 2019, and they’ve grown an additional 22% since then, representing massive equity gains for longtime homeowners. Because baby boomers are more likely to be homeowners who can use the proceeds from the sale of their current home toward their next one, they have a built-in advantage in a bidding war against younger buyers, who are often buying their first home.

“There are many hurdles millennials must overcome when buying homes of their own, one of them being fierce competition from the next-most-populous generation: baby boomers,” Tucker said. “Whether downsizing or moving to a new town, baby boomers being more active means competition that previous generations did not have when buying their first home. And older buyers have the advantage of a lifetime’s worth of savings and home equity to leverage in a competitive offer.”

While further research is required, one possibility for the growth in moves to rural areas may be fueled by millennials leading the exodus in search of affordable homes. If the theory bears out, an influx of young educated remote workers may be the very thing dwindling small-town America has been seeking for generations.