NAFCU Journal July August 2021

11 THE NAFCU JOURNAL July–August 2021 2 Arpit Gupta, Vrina Mittal, Jonas Peeters and Stijn Van Nieuwergurgh. “Flattening the Curve: Pandemic-Induced Revaluation of Urban Real Estate” (February 2021). National Bureau of Economic Research Working Paper No. 28675. https://www.nber.org/papers/w28675 , accessed May 2021. metropolises to lower-cost interior areas. Obviously, this migration would radically alter real estate markets, as well. But another study 2 suggests that the workforce may not be anticipating such a profound change, at least not yet. Researchers looked at the relation- ship between real estate prices to their distance from the city core (called the gradient), for both home prices and rents. They found that in cities like New York, Boston, and San Francisco, both rent and price gradients predictably flattened once the pandemic hit as residents moved out of the city’s core. But the effect was greater for rents than it was for home prices, apparently reflecting the market’s view that “urban rent growth will exceed suburban rent growth for the foreseeable future.” This could be a sign that owners are anticipating hybrid work arrange- ments where closer proximity to the city center is still a valuable commodity. In time, technology may mitigate some of the perceived downsides of full-time WFH, but for now it appears that hybrid arrangements will be far more common. As long as that remains the case, super- star cities are likely to remain extremely attractive, and expensive, destinations for workers. Curt Long is chief economist and vice president of research and Nadir Tekarli is research assistant for NAFCU.