For many clients today, the real estate industry is proving to be a seller’s market thanks to low inventory. However, a quarterly survey by ValueInsured finds that many potential sellers are staying on the fence when it comes to placing their home on the market because of the high price they’d have to pay for their next home.
The survey, released last week, found that 79 percent of homeowners believe now is a good time to sell a home. Two-thirds of homeowners are interested in actually selling their home “in the near future,” up 8 percentage points from last quarter.
For agents and brokers, this means more and more clients staying on the sidelines, which compounds the shortage of houses on the market in many regions.
A big questions many agents are asking is why so many clients are electing to stay on the sidelines in today’s market.
Among homeowners who are interested in selling their home either to upgrade or downsize, 72 percent say they are concerned with timing the real estate market. Overall, 63 percent say now is a good time for them to sell, but not to buy, due to high home prices and 61 percent are “waiting until prices to buy are better to make a move.”
“Homeowners in many cases are eager to sell but don’t want to become buyers,” said Joe Melendez, CEO of ValueInsured. “These homeowners have experienced a lot of home value volatility and see more uncertainties looming – tax reform, for example. By hesitating, these homeowners are actually controlling the market on both sides. Reassuring these individuals is the key to unlocking inventory.”
These findings resonate with external data: 48 percent of the nation’s top 50 housing markets are now considered “overvalued,” CoreLogic reported last week.
While many have speculated that low refinance rates are keeping homeowners from pulling the trigger to sell, the survey found that this factor is less consequential than expected. Only 18 percent of homeowners looking to sell say they haven’t because they don’t want to give up their current low mortgage payment amid rising real estate prices in many markets.
“Prices are going up,” says Chief Economist Danielle Hale of Realtor.com®. “So in order to get into the housing market, buyers need to have more income to afford the same type of properties.”
On the other hand, more potential home sellers (26 percent) say they second guess their desire to sell because they don’t want to pay brokers fees, new mortgage closing costs, capital gains taxes, and other associated expenses as it would weaken their buying power for their next home.
Home buying hesitations mirror overall housing confidence, which is down this quarter among Americans overall and homeowners. The ValueInsured Housing Confidence Index recorded a score of 67.7 on a hundred-point scale, down 1 percentage point since August.
Millennials, a closely watched segment, are no exception.
Millennial homeowners’ housing confidence dropped by 3.7 percentage points this quarter to 77.7 – a total 7.7 percentage point drop and the lowest score since the quarterly survey began in spring 2016.
With low confidence, sky-high prices and minimal inventory, desperate times are driving some homebuyers to take extreme measures.
The survey asked homebuyers what emerging home buying trends they think homebuyers will be most likely to regret, and the top five include the “no inspection” trend – 58 percent; the “offer sight unseen” trend – 57 percent; the “co-buying with strangers” trend – 54 percent; the “cashing out from retirement savings” trend – 37 percent; and the “tiny home” trend – 36 percent
High student debt, coupled with rising home prices, kept many first-time buyers out of the market. These real estate virgins made up only about 34 percent of home sales, according to the National Association of REALTORS®. That’s slightly down from 35% percent last year and the long-term average of 39 percent.
Those who were able to buy a home were a median age of 32.
“Right around turning 30 is still a significant milestone in many people’s lives,” says Hale. “That’s why we tend to see a lot of first-time buyers.”
These buyers typically had a household income of about $75,000, up from $72,000 last year. They were likely to buy a 1,650-square-foot abode for about $190,000 in a suburban area.
“The dreams of many aspiring first-time buyers were unfortunately dimmed over the past year by persistent inventory shortages,” NAR’s Chief Economist Lawrence Yun said in a statement. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”
What is next for these potential clients staying out of the game?
Overall, 57 percent of all homeowners surveyed who are interested in selling and moving believe they will move from their current home within the next three years, though some say they may rent out their home or pass it on to family instead of selling it. And among millennial homeowners, more than a third (35 percent) say they’re likely to change jobs soon, so they are waiting to see where that move takes them before selling to upgrade.
“Eventually, younger people move for jobs and empty nesters need to leave their five-bedroom homes,” said Melendez. “Selling and buying are always fraught with worry about timing the market, and life events don’t always cooperate. In any market, it’s wise to explore all your options for protecting your hard-earned equity.”
