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Please read and comment on our blog. For those of you in real estate, or consumers who are unsure about what to do next and what the future of buying and selling will bring, this blog is for you. Lots of good info and maybe this will help you understand the current real estate market a little better!
As most of you know, we are in the middle of an historic inventory crisis that’s driving up home prices to new highs. However, understanding why would-be sellers are sitting on the sideline has been a bit of a head scratcher. Now a new survey from Zillow is shedding light on how the pandemic is influencing homeowners who are considering selling in the next three years, and explains why they're not.
Life uncertainty, presumably caused by COVID-19, is keeping more than a third (34%) of would-be sellers out of the market. Financial anxiety is a big part of that: 31% of homeowners thinking about selling in the next three years say their uncertain financial situation is the reason they’re not moving, with 27% reporting a decrease in hours or pay, and 17% telling us they or their spouse/partner were laid off or involuntarily unemployed -- all reasons not to put that for sale sign in their front yard.
Many survey participants noted that where they work is another contributing factor. According to Zillow's most recent survey, the most common change for homeowners in the past six months is that they are working from home more often. Previous Zillow survey results found that two-thirds of those working remotely during the pandemic said they would consider moving if given the flexibility to continue occasionally working from home. However, those plans are not set in stone as employers are not sure when or if they will have their employees return to the office.
Nearly 40% of homeowners thinking about selling in the next three years say they hope for a more favorable sales price if they wait, telling us they don't feel pressure to list now in order to get a good price. Median sale prices are at all-time highs, up nearly 11% year-over-year for the week ending September 5th. Seller optimism has also rebounded; a September 2020 Fannie Mae Survey finds a majority (56%) of people think it's a good time to sell, compared to 29% who felt that way in the spring.
"Potential sellers are likely correct that home prices have yet to reach their peak, but in the long run prices tend to rise, so there's no clear 'right time' to sell," says Zillow senior economist Jeff Tucker. "Homeowners who feel life is uncertain right now may think they can still get a strong price if they delay selling until they have more clarity. The catch is that waiting to sell may raise the cost of a trade-up. This fall's record low mortgage rates, which make a trade-up more affordable on a monthly basis, are not guaranteed to last.”
More than 30% of homeowners (31%) thinking about selling in the next three years say their plans are paused because they are concerned about finding a new home they can actually afford. A 2020 Zillow report finds 63% of sellers are also buyers; these dual-track homeowners may sell their home for top dollar only to enter an extremely competitive buyer's market where homes are going under contract in less than two weeks. Near-record low interest rates are giving buyers a leg up, but current homeowners are also taking advantage of those low rates with 15% telling us that a recent refinance is another reason not to list their home at the moment. With no incentive to leave (low mortgage payments and nothing better on the other side) inventory stays low. Other factors that may be contributing to low inventory is, "Where do I go?" - retirees who once would have considered an urban lifestyle have reconsidered close-quarter living due to the virus; and perhaps elderly folks are staying at home longer for the same reason, to minimize contact with others.
Interestingly, virus safety was one of the least-frequently cited concerns among homeowners who have been hesitant to put their home on the market. Zillow's survey found 25% of potential sellers said they weren't selling because they were concerned about the health and safety of their family during the pandemic. The rapid adoption of real estate technology has allowed many home buyers to limit in-person showings. Those digital tools along with new safety standards and cleaning protocols are making would-be sellers feel more comfortable during the pandemic. that said, 25% is still a meaningful number. On the seacoast it would translate to 97 more listings* where listings are very much needed. *("Seacoast" Towns are Exeter, Greenland, Hampton, Hampton Falls, New Castle, Newfields, Newington, North Hampton, Newmarket, Portsmouth, Rye, Seabrook and Stratham
Last but not least, Zillow's survey found 6% of homeowners considering selling in the next three years indicated that taking advantage of mortgage forbearance was a reason to stay put. These programs allow homeowners to pause or reduce their monthly mortgage payments. One out of 10 homeowners said they weren't selling because an adult child or another family member had moved in with them during the pandemic.
The cumulative effect is a nationwide supply crisis with inventory down 37% year-over-year. COVID-19 changed the market in early spring, with both buyers and sellers staying put. Since then, buyers have returned to the market in droves, driven by demographic factors, low interest rates, and a pandemic-driven desire to move to a home better suited for our lives in this new normal. Sellers have been much more hesitant, leaving half a million fewer homes on the market than a year ago. These survey results provide a clear understanding of all the reasons homeowners are putting their selling plans on hold.