11 THE NAFCU JOURNAL JULY–AUGUST 2022 References 1. Ramani, Arjun and Bloom, Nicholas, The Donut Effect of COVID-19 on Cities (May 22, 2021). Available at SSRN: https://ssrn.com/ abstract=3850758 or http://dx.doi.org/10.2139/ssrn.3850758 2. Mondragon, John and Wieland, Johannes, Housing Demand and Remote Work (May 2022). NBER Working Paper No. w30041, Available at SSRN: https://ssrn.com/abstract=4110744 3. https://www.nahb.org/news-and-economics/housing-economics/indices/home-building-geography-index These findings have implications for credit unions. First, it should ease fears of a residential housing bubble poised to burst. As Mondragon and Wieland put it, “Our results suggest that the increase in house prices over this period largely reflect fundamentals rather than a speculative bubble.” Credit unions that serve suburban areas, and especially those that make loans to finance multifamily residential housing, stand to benefit. There is already some evidence that credit unions have capitalized on the donut effect; commercial loans outstanding for multifamily housing have grown by over 60% since the end of 2019. If remote work truly does explain so much of recent housing market dynamics, it requires any housing market forecast to wrestle with future developments in remote work. If present arrangements hold, price growth should return to a more normal level as construction in outlying areas catches up with the onetime jolt in demand. But the recent surge in prices could retrace itself if businesses ultimately reject or scale back on remote work. Alternatively, if emerging employers focusing on full-time rather than hybrid remote work succeed, there could be another shock to the housing market as workers find greater freedom to move between metros rather than simply within them.
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