We recently heard of a new hire who accepted the job and was preparing to relocate with their family. The only problem? They couldn’t find housing. The candidate ended up declining the position.
The cost of housing has always been a major consideration for candidates as they evaluate job offers, but rising inflation and a very competitive real estate market are making relocation more challenging than ever.
Low inventory and high prices
As the real estate market shows signs of plateauing after almost two years of unprecedented boom, it’s still important to understand that the inventory of both homes for sale and rental properties is extremely limited compared to pre-pandemic times.
Multiple factors – including the opportunity for many people to work remotely – created a dynamic real estate market during the pandemic. Demand for housing outstripped supply, and as inventory tightened, home values rose to all-time highs in most markets across the US.
While the market is showing signs of leveling out, investing in real estate continues to be a very expensive scenario for most people. According to the National Association of Realtors, buying a home in June 2022 was about 80% more expensive than in June 2019. They estimate that almost a quarter of buyers who were able to purchase a home three years ago would be unable to do so now because they no longer earn the qualifying income.
According to the US Census Bureau, the median home price nationally was $402,400 last month. Redfin reports that the median price of a home in Chicago is $370,00, and in New York City, $819,000.
Like many industries, home construction was severely impacted by supply chain issues during the pandemic, and builders couldn’t keep pace with the demand for new homes. Although access to building materials has increased in recent months, builders can’t construct new homes at the rate needed to catch up with the deficit created during the housing crisis of 2008 and exacerbated by the pandemic.
Challenges for buyers
For employees who can afford to buy a home, just being pre-qualified for a loan and having a down payment isn’t always enough to secure the right home at the right time. Being a buyer in today’s real estate market can be a frustrating and demoralizing experience because of:
- Limited inventory of homes for sale.
- Homes selling quickly. On average, it takes 14 days for a home in the US to sell. In New York City, the days on market is longer, with an average of 49 days, and in Chicago, it’s 54 days.
- Multiple offers. It’s been common for properties to receive multiple offers – many times exceeding the asking price.
- Privacy. Realtors and their clients can’t see the details of competing offers.
- Cash offers. In June, 25% of home sales were all-cash transactions.
- Rising interest rates. As the Fed raised interest rates to combat inflation, the rate on a 30-year fixed mortgage hit 5.81% in June. This week, mortgage rates are back below 5%, but still 1.75 points higher than at the beginning of 2022.
Challenges for renters
For people who can’t afford to buy a home, or are choosing to wait for home prices to go down, renting can be just as challenging as purchasing. The demand for rentals is high and so are monthly rents. In towns and neighborhoods that are a destination for tourists, rents can be further inflated due to short-term and long-term vacation rentals.
Since January, rents in Chicago have risen 11%, and the median rent for a one-bedroom apartment is $1,800. In New York City, the median rent is $4,100 per month, a record high.
Renters face many of the same challenges as buyers, and also unique ones:
- Low inventory of homes and apartments for rent.
- Rentals being leased quickly.
- Multiple applications.
- Rental agreements are relatively short-term. As demand rises, landlords may raise rents when a lease is up for renewal.
The US Department of Housing and Urban Development defines spending more than 30% of household income on rent as “rent burdened” and more than 50% as “severely rent burdened.”
Strategies for employers
Compensation packages that account for inflation and steep housing costs stand out to candidates. Moving is expensive and stressful, and hiring managers who understand how to offset these financial and emotional costs can make all the difference in hiring a valuable new employee. A relocation or compensation package can include:
- Time to look for housing.
- Travel or lodging accommodations for house-hunting visits.
- Professional real estate services.
- Moving expenses.
- A hybrid work schedule to reduce commutes from more affordable areas.
You have invested a lot of energy to search for and retain your new hire, and welcoming them to your company and city is important work. Keeping up with the local real estate market can help you counsel new hires on up-and-coming areas that match their lifestyle and housing budget.
If you have an employee intranet or chat platform like Slack or Yammer, consider creating channels dedicated to sharing new listings for rentals and homes for sale. And, maybe most importantly, being patient with your new hire as they navigate a tricky real estate market – and encouraging them to do the same – might be your best approach.