With interest rates high and possibly going higher, housing inventory at historic lows, and home prices at all-time highs, employee relocations have perhaps never been more complicated. What does all this mean for HR teams managing employee relocations this year?
Headwinds from all directions
Average mortgage rates are hovering just above 7% in the U.S., according to Freddie Mac. Federal Reserve Chairman Jerome Powell has hinted that there may be yet another rate increase before the Fed believes it has tamed inflation. And that assumes an employee can even find a suitable home in their destination city.
In a recent Forbes article, Palisades Group Chief Investment Officer and Co-founder Jack Macdowell noted that, “Inventory is approximately 46% below the historical average dating back to 1999. We think that it is highly unlikely that the inventory problem will be resolved in 2023.” And even if the transferee can find the perfect home, it is very likely to be less affordable, thanks to continued COVID-induced appreciation coupled with the inventory shortage.
The Impact on Employee Relocation Decisions
The changing real estate market is impacting employees’ approaches to relocating as they weigh the pros and cons of selling their existing home and buying another. Employees who locked in low rates to buy their current home may be reticent to lose those lower payments in exchange for today’s elevated ones. And if they purchased their home within the last year or so, they may not have enough equity built up to realize a profit on it yet.
On the flip side, hanging onto their current home makes it even harder to afford a home purchase in their destination. One outcome of this is that some families are choosing not to relocate together — the employee opting instead for temporary corporate housing while others stay behind to maintain their home. We are seeing others choose to relocate and keep their home but lease it while they are temporarily relocated elsewhere.
Ways the HR Team Can Help Transferees
Transferring to a new work location in this challenging real estate market is a complex undertaking. There are several ways the HR team can help employees navigate these factors during the relocation process.
Set the Employee Up for Success
It is important that transferees who want to purchase a home in their new location have their financial ducks in a row. Ask your relocation management partner to vet and recommend trusted and knowledgeable finance experts who can guide your employees on ways to strengthen their credit score and improve their financial picture. Your relocation management partner should also be able to recommend experienced real estate professionals in both the originating city and the destination. Those experts can help your transferees to prepare their home to sell and price it right. They’ll also know the new location, neighborhoods that best meet the transferees’ needs and price ranges to anticipate.
Make the Relocation Process Seamless
Relocating homes and cities is stressful, even in the best of markets. Make sure that your HR team is taking the stress of a move off the employee by partnering with move management experts who not only know what to do, but also who to trust to do it with, and how much each piece of the process should reasonably cost.
Look for a relocation management company that oversees every supplier relationship across the supply chain to ensure a smooth transition. Are your employees’ moves being handled by crews who are background checked, drug tested, and demonstrate good driver safety ratings? Are you reaping the benefits of working with experts in moving who you can count on to represent the client’s best interest and who hold accountable the companies they partner with?
Provide Transparent Budgeting
Today’s more costly operating environment make it challenging for HR to manage relocation budgets, while also giving transferees visibility and control over their relocation benefits. A tool like CompanionFlex, CapRelo’s core-flex platform, meets both needs.
The HR manager can customize a transferee’s core and flex benefits and the value of each benefit offered, for a total budget amount. As the employee “shops” benefits within the portal, they can add favorites to their wish list to review later or add items directly to their cart and purchase them immediately. When ready to check out, the transferee sees in real-time the amount spent from their virtual wallet and remaining available budget for their move.
CapRelo: Over 25 Years of Navigating Real Estate Challenges
Navigating the unpredictable and challenging real estate markets of 2023 is where having a knowledgeable mobility partner is a game changer. With more than 25 years of global mobility management experience, we have the resources and industry knowledge to keep your relocation program moving through rapidly changing trends and challenges. Let us help you move your company and people to their future.