The red-hot post-pandemic U.S. real estate market and the growing desire for home ownership across several generations are creating unique challenges for companies relocating employees within the U.S.
Selling or buying a new home while relocating can be a very stressful process, especially when relocating with a partner or family. It can positively or negatively impact the relocation process, the well-being of the relocating employees and their ability to settle into their new community and role.
Based on decades of experience supporting client companies and their employees through the ups and downs of the U.S. real estate market, here are some tips and insights for companies seeking to create exceptional experiences for mobile employees through the home sale and buying process.
Current Trends Shaping the U.S. Real Estate Market
The forces shaping the U.S. real estate market experience today all ladder up to the same driver: in most cities, the demand for homes is surpassing the supply. That creates a tight market for mobile employees and puts increased pressure on companies to ensure they’re doing all they can to provide positive relocation experiences. Let’s take a deeper look:
- Low interest rates put more buyers in the market. Interest rates were low by historic standards even pre-pandemic. When the economy took a hit due to stay-at-home orders, the Federal Reserve said it would keep interest rates at or around zero, to help stimulate the economy. This means low mortgage rates have made purchasing a home more appealing and feasible for buyers across the country. Low rates have also enticed more investment buyers into the market, increasing competition and driving up home prices.
- Shift to work-from-home changes where employees want to live. The ability to work from home pushed many to reconsider where they live. Rather than renting a one bedroom in the city because it cuts down on commute time, many moved to the suburbs or to smaller, more affordable cities to buy houses with more room for at-home workspaces. With many people flocking to the same places, it can be tough for mobile employees to find a new home in their destination city.
- Cash buyers heighten competition. As the market gets more competitive, many potential buyers are turning to cash to make their offer stand out. This complicates the home buying process for mobile employees relying on financing to make an offer, because from the seller’s perspective, an offer contingent on financing is less enticing. If mobile employees get outbid time after time, it could take longer for them to find a new home, potentially creating a more stressful relocation experience for the employee, as well as cost implications for your company that I’ll explore further.
- Corporations relocating to smaller markets. Just as individuals are leaving big cities for more affordable places, corporations are doing the same. For example, Oracle is setting up HQ in Austin, TX, and Apple announced a new campus in Charlotte, N.C. With these new offices come new jobs — and new people moving into those cities, impacting home prices and inventory.
Forecasting Real Estate Trends
As companies look out six to 12 months for future relocations, many are wondering how the marketplace will have changed, if at all, by that time. My advice: unless there’s dramatic economic change within that timeframe, expect this hyper-market activity to continue for the next year or so. The silver lining is that if interest rates rise, as they have begun to do, the market could soften, cooling off an over-heated market and making renting a better option than buying a home for some mobile workers.
The other factor we can expect to see in the next year — and to some extent already are seeing — is the impact on new builds. Many relocating employees are opting for new construction, due to the lack of home inventory and stiff competition for existing homes. COVID-related issues have impacted the supply of lumber and raw materials, meaning new builds will take longer to complete and will cost more, as demand for building materials will remain high.
Three Implications to Consider for Talent Mobility Programs
What do these current and future trends mean for your company’s mobility program? If you haven’t recently, examine your U.S. real estate policies and benefits. Many companies have been so focused on international relocations for the past several years that their domestic policies have taken a back seat. It’s important to acknowledge that what may have sufficed in the past may not be enough to provide an exceptional experience now. Things to consider:
- Home Buying and Selling: Putting Your Employees in a Position to Succeed
Speed and efficiency are the keys to finding the best home at the best price in a hot real estate market. Before mobile employees even visit their destination city for a home search trip, encourage them to get pre-approved through a preferred relocation mortgage provider. This will help better position them to sellers and speed up the process if they do find a home on their trip. It’s vital that you partner with the best brokers and agents in the marketplace to position your people as the #1 buyer in the marketplace, at the head of the line for purchase opportunities, insights and relationships. This will help them get into houses at the top of the list or even access to houses that aren’t yet listed, increasing their chances of finding a home.
What happens if your mobile employee can’t find a new home within the three days allotted for a home search trip, even with the best broker in the market? Here are a few questions to consider:
- If they have time before they relocate, will you provide a second home search trip?
- If they need to relocate immediately, will you provide extended temporary living, rental housing or pay for them to fly back and forth between their home and destination city?
- And if they do move into extended temporary living or rental housing, and then eventually into permanent housing, will you pay for a second household goods shipping?
Answering these questions is a balancing act between cost and employee experience that each company must navigate.
- Broker and Agent Partnership: Leveraging Experience and Knowledge
Setting your mobile employees up for success during the home selling and home buying experience requires partnering with experts, both relocation management companies (RMCs) and real estate agents, with in-market knowledge. They not only help your mobile employees market their home to get the best offers, strategize on how to pick the best one, and advocate for the mobile employees to find the best new home at the best price – they also have a vital hand-holding role in creating an exceptional experience.
With something as personal as real estate, some companies prefer not to get involved in the agent selection process, instead deferring to mobile employees to find agents on their own. However, through our experience managing thousands of domestic relocations a year, partnering with an RMC who can recommend vetted, trained agents creates a better experience for your mobile employees – and potentially saves money for your company.
RMCs with an open real estate network, like Graebel, offer the flexibility to work with market-leading, trusted partners to ensure a great fit between the broker/agent and mobile employee, taking into account all the employee’s individual needs and matching it to the broker/agent’s extensive in-market knowledge. On top of that, at Graebel we manage the performance of the selected broker, to help ensure a great experience for your mobile employee.
- Cost Calculations: Balancing Experiences with Program Costs
The household goods shipping and rental housing examples noted above are just two of many where your company could be covering additional costs for mobile employees due to the highly competitive real estate market. Another item to consider is the impact of your company’s tax-protected home sale program. To remain compliant, relocation management companies must purchase the mobile employee’s home at the selling price negotiated with a buyer. However, if the buyer’s mortgage appraisal comes in under the home selling price, you could be saddled with covering the difference. Take a look at which home sale options you’re offering to which mobile employees to find ways to manage these costs – while still making sure they feel supported and valued.
Creating real estate policies requires companies to walk a fine line. I encourage you to assess the costs you currently cover for mobile employees and if they’re providing enough support without breaking the bank. Keep in mind, creating an appealing relocation offer and exceptional experience is key to recruiting and retaining the top talent your company relies on to be successful.
Our Mobility Strategy and Business Intelligence team actively conducts Home Sale Analysis projects for companies to optimize their program using data, while creating people-first mobility strategies. Our knowledgeable consultants are experts at the entire relocation process and remain dedicated to your mobile employee from beginning to end, including real estate transactions, allowing us to better serve you and your mobile employees – contact us to learn more.