When companies relocate employees, the workers often face challenges finding suitable housing. Berkshire Hathaway Home Services CEO Kathy Connelly has insights.

NEW YORK – As the world grapples with the complexities of the modern job market, an increasing number of companies are finding themselves in the position of relocating their employees to different regions or states. This process is fraught with challenges, particularly in the realm of finding suitable housing options for these relocating individuals.

To shed light on this issue, we spoke with Kathy Connelly, the chief operating officer of Berkshire Hathaway Home Services.

What are some common obstacles companies encounter when finding suitable housing options for their relocating employees? Are there any unique obstacles right now?

Inventory continues to be a challenge across the country. At certain price points, it is common for a buyer to experience multiple offers, often paying above list price. Often buyers are waiving or limiting property inspections, which could result in the purchase of “unknowns” and could be problematic when the transferee is transferred in the future. Costly repairs, a decline in the property value, disclosures, etc., could be an issue on the resale. Also, some states have due diligence periods that require nonrefundable fees; others have option money. In these states, the transferee may experience a loss if they don’t perform to the contract. Other states require refundable earnest money, but the seller may choose a qualified buyer offer that has fewer or no contingencies preventing an accepted offer.

Although unit sales fell, home prices have held firm in most parts of the country. One-third of homes sold above the list price in the last month. The increased interest rate negatively impacts the purchasing power of relocating employees. A home buyer purchasing a home at $410,200 (median price for single family) translates to a mortgage payment of $2,135. The limited supply and increased interest rates have forced some to consider rental options. Many people are living in their homes longer. We used to see five to seven years on average in a property, and that has now moved to 10-13 years, which further perpetuates low inventory.

Demand and limited supply have significantly impacted rental prices. From February 2021 to February 2023, rents grew by 18.47%, a $302 average price increase. Since the beginning of the pandemic, renters have been seeking more space and flexibility, leading to a surge in demand for single-family homes and apartments in suburban and rural areas. As developers work to improve inventory in the multifamily space with improved availability of apartments, we expect rents to normalize in the multifamily space, but rates will continue to increase for single-family options.

How do factors like housing availability, affordability, and quality impact the relocation process for employees?

With interest rates more than double from a couple years ago, low inventory as well as hybrid/remote work options, we are seeing the reluctance for some to even consider relocation. Those who do opt to relocate may have a challenging experience and often find themselves making multiple offers, settling for less than optimum choices and potentially paying over list price. This all has a direct impact on relocation volume and the cost of relocation. Clients often provide benefits that will be directly impacted. Higher home prices may trigger a mortgage interest differential benefit, higher closing cost reimbursement, increased cost for van lines (fuel price), increased time/cost for house hunting trips and temporary housing, as well as increased prices for airfares. The transferee may pay multiple rental application fees that may or may not be reimbursable; multiple offers are also common for rentals. There are also miscellaneous fees, such as credit cards fees being passed along to consumers, increased restaurant prices, etc.

Are there any specific geographic locations or regions that pose unique challenges when it comes to finding suitable housing for relocating employees?

Year over year, unit sales have declined 18.9%, and although inventory has increased to 3.1 months, it is still well below the normal market inventory of six months. We are not seeing a significant improvement in choices or prices of desirable properties. There are fewer institutional investors competing for inventory than in the past couple of years. No income tax states are experiencing a significant influx of newcomers. States like Texas, Florida, and even Tennessee are benefiting from an exodus from higher cost markets. The NAR (National Association of Realtors®) housing shortage tracker identifies the lowest inventory markets. Several of these markets are also considered high-cost areas in general.

Sales varied among the four major U.S. regions, with the Northeast experiencing gains, the Midwest holding steady, and the South and West posting decreases. All four regions recorded year-over-year sales declines.

Northeast: Existing-home sales rose 2% month over month to an annual rate of 510,000 but are down 21.5% from a year ago. Median price: $475,300, up 4.9% from the prior year.

Midwest: Sales were unchanged from a month ago at an annual rate of 990,000, falling 19.5% from one year ago. Median price: $311,800, up 2.1% from June 2022.

South: Sales decreased 5.4% from May to an annual rate of 1.91 million, a decrease of 16.2% compared to the previous year. Median price: $366,600, down 1.2% from a year ago.

West: Sales fell 5.1% from the previous month to an annual rate of 750,000, down 22.7% from a year ago. Median price: $606,500, down 3.4% from June 2022.

Are there any innovative solutions or technologies in the real estate industry that can assist companies in streamlining the process of relocating employees?

During COVID-19, the industry relied heavily on technology for property showings. Tools like Zoom, FaceTime, and other similar technology are available to narrow choices. The challenge is the market is moving fast with multiple offers in the typical transferee price range, and the competition makes many of these tools less desirable. More information is available to view online, but real estate is a huge financial investment, and most people want to see the community for themselves. Virtual inspections for things like household goods is proving to be a valuable tool. ChatGPT is proving an interesting solution for writing property descriptions but needs review and tweaking to avoid fair housing and other potential violations.

2024 States News Service

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Author: amyc