U.S. real estate market and the impact on cost-of-living

    Jul 19, 2021 @ 12:38 PM / by Christopher Bloedel

    Skyline of Charlotte, North Carolina at dusk

    Mark Twain famously said, “buy land, they’re not making it anymore”. This rings true today as it relates to the U.S. housing market. Various reasons – local market conditions, lack of supply, robust demand from homebuyers as they take advantage of historically low interest rates, etc. – have caused a surge in home prices. According to Zillow, the average home price in the U.S. has risen approximately 13% over the last 12 months from $253,000 to $287,000 and it doesn’t show signs of stopping as Zillow predicts the average home price to increase another 15% from 2021 to 2022.

    Impact on U.S. domestic relocation

    Hot real estate markets can make it difficult for relocating employees. High prices can often mean reduced affordability and leave some buyers on the sidelines. Limited availability can delay the move and cause stress on the family. Worldwide ERC has consistently cited high cost-of-living as one of the main reasons why employees are reluctant to relocate. This issue can have real consequences on your company’s ability to recruit and retain talent in a highly competitive labor market.

    Addressing move reluctance with cost-of-living assistance

    Housing costs are a large part of someone’s annual spend but there are other items to consider. It’s important to look at the TOTAL cost-of-living impact between two locations. This should include an analysis of housing, taxes, goods & services, and transportation. Examining several different cost factors can help balance the impact of one or two elements. Many companies will pay the cost-of-living differential as a separate line item on an employee’s paycheck for a pre-determined amount of time. The goal is to temporarily assist but not permanently subsidize the difference in cost-of-living.

    What about negative COLAs or moves to lower cost areas?

    A negative COLA that reflects a move to a lower cost area can be a great recruiting tool! It outlines the areas where the transferee and their family will realize cost savings such as cheaper housing, lower taxes, etc. This means real money back in their pocket and can help sell a move and make the transition to a new role/location easier.

    Do you need help with domestic and cost-of-living analysis?

    Reach out today to discuss how we can help design and implement a COLA approach to enhance your ability to attract and retain talent. You can reach me directly here or learn more about our Domestic approach by clicking below.

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    Topics: Housing, Expatriate Housing, Cost of living data, Rental property, Cost of living allowances, Calculate a housing budget, International Housing Guide, Housing Assessment Tool, Domestic Mobility Programs, Domestic Moves

    Christopher Bloedel

    Written by Christopher Bloedel

    Christopher rejoined AIRINC in June 2019 (he previously was with the company from 2011 to 2014) as a Relationship Manager and is responsible for engaging and consulting with clients regarding global compensation issues. Prior to AIRINC, he worked for over 20 years in the mobility industry with consulting and relocation management companies in various research, account management, and business development roles. His experience includes mobility policy review and consultation for various Fortune 500 companies as well as active roles in national and regional mobility groups such as Worldwide ERC and the Midwest Relocation Council. He has a Bachelor's Degree in Economics from the University of Wisconsin, Parkside and works out of his home office in Wisconsin.