Adding nuance to our weekly Teams Beat newsletter, January is Teams Month at Inman. Find out whether you should join a team, what it takes to build a team from the ground up, and when to consider leaving. Additionally, he will receive the coveted Inman Power Player Award, the New York Power Brokers Award and the second class of the MLS Innovators Award.
Hardly a week goes by that I don’t receive a phone call asking if I’m interested in selling my home. Whether it’s a flipper trying to get an off-market deal or a local real estate agent looking for a potential property, our response to them is always the same. This is our forever home and we plan to box it up and leave. ”
Truth be told, my wife and I had been looking for a home like ours for nearly 40 years, so when the opportunity finally came, we jumped at it. Considering the location of our home, the amount of money we invested in building it to suit our lifestyle, the extremely low mortgage rates, and the proximity to other families, we believe that It is unlikely that you will fit firmly into the homeowner category. A recent study by Redfin declares that they will “never sell.”
More than a third (34%) of U.S. homeowners say they will never sell their home, according to a study commissioned by Redfin. A further 27% said they would not consider selling for at least 10 years. Almost a quarter (24%) plan to sell within 5-10 years, while only 8% plan to sell within 3-5 years; 7% plan to.
By generation, older homeowners are more likely than younger homeowners to say they will “definitely not sell.” More than two in five baby boomer homeowners (43 percent) say they will never sell, compared to 34 percent of Gen X homeowners and 28 percent of Millennials/Gen Z. It is a percentage. ”
While this is great information, keep in mind that Redfin only surveyed 1,802 adults, and only 738 of them responded about their potential sales plans. While this is not enough to provide conclusive data, it at least provides a window into what we already know has been the market reality for the past two years since interest rates started rising. can.
But their data reveals changes that homeowners are citing as reasons for not moving.
In September 2023, I wrote a post titled “8 Reasons Why Sellers Don’t Sell (and How to Break Out of Sellers).” I have listed the issues that I consider to be most important in order of importance.
I’m worried that I won’t be able to find a replacement home. I don’t want to lose the current low interest rates. Concerns about being hit with a huge federal capital gains tax bill. Potential increase in property tax payments. Frustration at missing the peak in the previous market. Improving a home for sale can be expensive. Insurance premiums for your new home may be higher. Seniors choosing the appropriate age.
Since then, using Redfin data, the reasons for the lack of movement appear to have changed. Some of the previous reasons still exist, but they don’t seem to have as much weight as they were given a year or so ago. According to Redfin, the new listings are:
1. 38.6% said their home was fully or almost fully paid off.
Data shows that a significant percentage of homeowners have worked hard for years to get out of their mortgage and have either achieved that goal or are close enough in their minds that there is no point in selling. I know that.
Using a car analogy, many people choose to keep driving after paying off their car rather than selling or buying a new car with the new payment. The same logic seems to apply to sellers.
In fact, looking at the demographic most likely to pay off their mortgage (boomers), Redfin data reveals that 43% say they will never sell their existing home. Ta.
Another thing to keep in mind is that people born between 1946 and 1964 are likely to have raised a family and have already moved several times due to work, family size, etc. In many cases, this means they are retired and getting their lives in order. You will be in a situation where you no longer need to move. They are at a stage in their lives where they want to travel and enjoy other benefits that they have worked so hard to achieve.
People in this category who actually want to sell may be downsizing, moving closer to grandchildren or other family members, relocating to a warmer region of the country, dealing with the death of a spouse, or going through a divorce. I’ll probably sell it to do it.
2. 36.7% said they “just love their home and its location and have no reason to move.”
This is directly related to reason #1 above and reflects the fundamental shift in the American psyche resulting from events of the past two decades, including the housing market crash, a global pandemic, and unprecedented home price increases. I believe it represents.
In a post I wrote in January 2016, I said, “The ‘move-up’ segment of the market has all but disappeared as there are no more homes available to purchase to replace existing properties.” Homeowners have historically moved on average every seven years, but a series of factors over the past five years have now increased that average to 10 years. Advance buyers have traditionally made up a large portion of the buying population, so the fact that they’re not going anywhere will leave a big gap in the market in 2016. ”
In fact, this trend will become even more important as we enter 2025. Marije Kruisoff, Redfin Premier Agent in Los Angeles, agreed: The main reason is that buying a new home is very expensive.
“People who are selling are selling because they have to. They’re relocating to another part of the country or because of a major life event like having a baby or a new job on the other side of the city. I’m moving.”
3. 30% say housing prices are too high
The concept of “overpriced” may not make much sense at first, as this group represents people who already own a home and are looking to sell and move on. After all, they are selling a house worth a lot of money in order to buy another house, which although expensive, they should still be able to get given the profit they made on the sale of their first house. is. In fact, this scenario makes even less sense if the seller is moving to a smaller home.
The first problem is the fact that as the price of housing increases, so do the associated costs. Commissions, title and escrow fees, insurance premiums, real estate transfer taxes, etc. are all based on the sales price.
The second is the gap between the original home and the new home. If the home sells for $100,000 and the replacement home costs 20% more, the difference is $20,000. However, if your first home was $1,000,000 and your replacement home is 20 percent more expensive, the difference is $200,000.
This is not an unrealistic scenario in many markets across the country, especially in markets such as the San Francisco Bay Area. There, many older homeowners bought their homes years ago and their homes have increased in value by more than 15 to 20 times since the time of purchase.
A seller who bought a home for less than $100,000 a few years ago can now sell the same home for well over $1 million, even after the home seller tax. , a huge capital gains tax will be levied. From this perspective, while the purchase price of replacement homes is too high, the sale price of existing homes is also too high, resulting in taxes and significant losses of capital that cannot be used to purchase homes. It will disappear. an alternative home for them.
4. 18% “don’t want to give up low mortgage rates”
This is interesting to me because it has often been touted as the main reason why sellers don’t sell. As Anderson declares, this has become a serious problem. “A recent Redfin analysis found that more than 85 percent of U.S. homeowners with mortgages have interest rates below 6 percent.”
In fact, if this study is correct, only one in five people will be keeping the “golden handcuffs” of low interest rates in their homes. This may actually bode well for buyers, as it may represent a population of potential sellers who are no longer willing to delay future plans based on current interest rates.
If the study is correct, this data could mean that the recovery in 2025 will be slower than most expected, as there may continue to be a shortage of homes for sale. If you’re a real estate agent looking to encourage permanent homeowners to move, understand what’s behind the four issues above and create conversations that encourage potential sellers to sell now rather than later. It needs to be expanded.
At the beginning of my September 2023 post, I wrote: Despite market conditions that effectively trap sellers in their homes, we encourage them to chase their dreams. Rather than live with the regret of what could have been, we work with them to ensure that the current market does not rob them of their potential future. ”
In other words, we sit alongside potential sellers, help them clarify their dreams, and provide a path forward. After all, they may not decide to move, but they probably know someone else will, and by spending time in a thoughtful, thought-provoking way, you can help them You can win the day with an introduction.
