Why Are Homeowners Choosing Not to Sell?

Why Are Homeowners Choosing Not to Sell?

The average tenure of homeowners remaining in their current homes has increased from an average of four years in 2007 to 10 years in September 2018, according to First American's report on Potential Home Sales released on Thursday.
The report indicated that despite rising home equity, rising interest rates were creating a financial disincentive that prevented existing homeowners who had locked in their mortgage rates when they were low, from selling their homes. This, in turn, according to Mark Fleming, Chief Economist at First American, was "further limiting supply and restricting existing-home sales from reaching their potential."
Citing data from DataTree by First American, Fleming pointed out that just prior to the financial crisis homeowners stayed in their homes for four years, but that tenure increased to around seven years between 2008 and 2016.
"Many people remained in their homes because their mortgage balances exceeded their property values during this time, so they would have lost money by selling their homes," he said. "However, as home prices have recovered over the last 10 years, many homeowners have accumulated enough equity to sell their homes at a profit. Despite the increase in equity, median tenure length jumped to 10 years in September 2018, a 10 percent year-over-year increase."
Data from the Potential Home Sales model indicated that the market for existing home sales was underperforming its potential by 7.2 percent, even though potential home sales increased to a 6.18 million seasonally adjusted annualized rate month-over-month in September.
"There is less incentive to sell your home if borrowing the same amount from the bank at today’s rates will be more expensive than your existing monthly mortgage payment," Fleming said. "As rates rise, many existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate."
The report measures existing-homes sales, on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population demographic data, income and labor market conditions in the U.S. economy, price trends in the U.S. housing market, and conditions in the financial market.
As Published in DS News 
Author: Radhika Ojha


Guillermo "Bill" Sanjurjo Realtor®  Cell: 786-232-1400

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