The sudden shift to remote work amid the pandemic has been found to be the driving force behind surging home prices, according to new research published on Monday by the Federal Reserve Bank of San Francisco.

Titled Remote Work and Housing Demand, the economic letter revealed that increased demand for working from home accounted for 60 percent of overall home price increases between November 2019 and November 2021. National home prices skyrocketed by nearly 25 percent to record levels over that period.

“Our results suggest that rising house prices over the pandemic reflected a change in fundamentals rather than a speculative bubble,” the authors wrote.

“This implies that the evolution of remote work may be an important determinant of future housing costs and inflation,” they continued.

The research further showed that cities considered more desirable for remote work saw the heftiest home price increases. Similar effects were seen with rent prices, which have hovered near record levels across the country.

“Together, this evidence suggests that remote work caused a relative increase in the demand for all types of housing,” the authors noted.

However, over the past several months, home prices have reversed course due to more inventory and elevated mortgage rates, which have doubled from a year ago, reaching 6 percent in mid-September.

In fact, according to a report released on Tuesday, home prices fell in July at the fastest rate in the history of S&P Case-Shiller Index. Prices nationally climbed 15.8 percent over July 2021, but that was well below the 18.1 percent increase seen in the previous month.

“July’s report reflects a forceful deceleration,” Craig Lazzara, managing director at S&P DJI, wrote in a release, per CNBC.

The 2.3 percentage point “difference between those two monthly rates of gain is the largest deceleration in the history of the index,” he continued.

“As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day. Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate,” he added.

Meanwhile, Redfin has reported that bidding-war rates for homes have dropped to their lowest levels since April 2020.

“Nationwide, 44.6% of home offers written by Redfin agents faced competition in August, the lowest bidding-war rate since the beginning of the pandemic when the housing market nearly ground to a halt,” the company wrote in a release.

“It’s down from 63.5% a year earlier and a revised rate of 47.2% in July, and marks the seventh-straight monthly decline,” it concluded.

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.