: Are property prices in your neighborhood still rising? Blame it on the ‘donut effect’

United States

There is a common wisdom in the real-estate market that the pandemic has radically changed how people can do their jobs, allowing a large swathe of Americans to move far away from expensive coastal cities to smaller towns across the country.

A new study has put that theory to the test to see how far Americans really are moving because of the pandemic. To examine pandemic-era moving trends, researchers from Stanford University analyzed home price and rent data from Zillow Z, -3.20% ZG, -2.16% and migration patterns from the national change-of-address data set from the U.S. Postal Service.

In reality, workers who did choose to relocate outside of major cities during the pandemic didn’t go all that far.

The researchers discovered what they described as the “donut effect.” Americans who moved out of big cities during COVID-19 have typically settled in suburban zip codes around those same cities — the aforementioned donut — rather than in further-away smaller cities or towns.

Based on their analysis, about 15% of residents and business establishments appeared to have left the central business districts or city centers of larger metropolitan areas amid the pandemic. Meanwhile, the suburbs of these cities have seen home-price growth compared to those city centers diverge by nearly 15 percentage points.

More evidence supporting hybrid work

In theory, being able to work from home “enables an employee to live further away from their place of work by reducing or eliminating commutes,” Stanford student and researcher Arjun Ramani and Stanford economics professor Nicholas Bloom wrote in their working paper distributed this week by the National Bureau of Economic Research.

So why aren’t workers moving further afield? The Stanford researchers suggest it’s a reflection of what Americans are expecting their working set-ups to look like once the pandemic is over.

“We take this as evidence that post-pandemic, work will be primarily hybrid, with workers commuting to their business premises a couple days a week,” Ramani and Bloom wrote. “This is less than pre-pandemic, making suburbs relatively more popular.”

A separate working paper co-authored by Bloom, based on a survey of more than 30,000 Americans, suggested that working from home is likely to stick, especially because workers report being more productive from home. But only 31% of workers surveyed said they want to perform their jobs from home all five days of the work week, whereas the rest either wish to return to the office or have a hybrid set-up.

The analysis also noted that the donut effect didn’t occur in all metropolitan areas. This migration trend was most prominent in and around the 12 largest cities across the country by population, and prevalent to some extent across the 50 largest cities nationwide. Smaller cities showed no evidence of these migration patterns.