Portions of the US labor market and housing sector are under close watch as leading economic indicators. With fewer CEOs prioritizing return-to-office mandates entering 2024, hybrid and work-from-home setups may have more staying power than employers expected.

Moody's Analytics Chief Economist Mark Zandi joins Yahoo Finance Live to discuss the changes that have led to post-pandemic shifts, especially for commercial real estate market.

Zandi states “there’s no going back,” for full-time, on-site work and expects new companies and organizations to “optimize around remote work dynamic.”

With home prices increasing, Zandi predicts that “life changes” such as various needs for downsizing or home expansion will lead to seeing home prices “go flat.”

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

BRAD SMITH: You've got a lot of employers that are telling employees that they got to come back to the office. You know, is that the next big factor, perhaps, that can shift the housing situation when you have people that have anecdotally told us that they never thought that they'd have to move back to some of the cities that their office used to be in?

MARK ZANDI: Yeah, there's no going back, Brad. I knew employers want people to come back and they're going to try really hard and the pendulum is starting to swing back a little bit. But there's no going back. I think the die has been cast. The remote work is here to stay, as technology improves and makes it easier for people to communicate and feel like they're in the same room with each other. And also as new businesses form, they're not going to optimize around an office building. They're going to optimize around remote work dynamics.

So I just don't see it. So, no, I don't think that's going to change the dial here. I mean, housing is really, really important. But the thing that matters there is affordability and supply and all those kinds of things that affect the cost of housing and rents and ultimately inflation. But in terms of remote work and housing, I don't see that changing.

SEANA SMITH: Mark, what are your expectations when it comes to homes and housing prices here over the next, say, 12 to 18 months? Because we have seen this run-up here in prices. It almost seems like nothing's stopping it. Demand is still there, that further pushing up the price of homes. Are we going to see any relief?

SEANA SMITH: Well, you know, I forecast lots of things, Seana. Some things I got felt pretty good about like no recession in 2023. I got house prices dead wrong. I thought we'd see some price declines in 2023. We saw them in '22 when interest rates first rose but-- increased, but that didn't happen in 23 because of the interest rate lock. People with homes just aren't going to sell them, because they have a 3.5% mortgage and doesn't make any economic sense to move.

So, yeah, you have to consider that when I give you my rate-- my outlook for house prices. You know, my sense is, at this point, what's going to happen is over time, life changes, people are going to have to make changes in their housing situation, you know, children death, divorce, job change. And when they have to move, and ultimately they will, they'll have to become more aggressive on pricing. And we will see some price weakness.

Not big price declines. It just isn't enough supply. But maybe prices go flat for a couple three, four years, let incomes and interest rates catch up and restore affordability.