Over the past few years, housing experts have come up with two solutions to bolster inventory and slow home price growth — ramp up new residential construction and encourage a larger share of current homeowners to place their homes on the market.
But according to Bankrate’s latest analysis, housing experts are going to have to rethink the second part of their plan. Seventy-nine percent of homeowners told Bankrate they don’t plan to move in the next five years. Another 62 percent said they’ll never move from their current home.
“Americans are essentially staying put in their homes for the foreseeable future, either by choice, or by necessity or some combination,” said Bankrate.com Senior Economic Analyst Mark Hamrick in a press release.
Hamrick said homeowners aren’t willing to jump into a housing market plagued with historically low inventory levels, record-breaking home price growth and mortgage rates that are inching closer to 5 percent.
How to get homeowners moving
So what would it take to get homeowners to sell? Theoretically, Hamrick said, there are a handful tax-related policies that could be created to incentivize selling, but those are highly unlikely. In reality, homeowners are more likely to be driven by personal needs and wants than policy changes.
“The actual forces that compel individuals to decide to sell their homes reflect the prices they can command, how much they clear on the sale and the advantages of moving on to the next home, including whether scaling-up or downsizing and/or opting for lifestyle changes, such as new job, different climate, lower taxes, etc.,” he said in a statement to Inman.
Since homeowners seem firm in their decision to stay put, Hamrick said the real estate and housing industries will have to focus on three things: increased residential building, reduction of building and zoning regulations and pushing for more programs for first-time and under-served buyers.
“One of the dampening forces for housing inventory is the shortage of new homes being built and sold,” Hamrick told Inman. “For example, new home sales recently have been running at about half the level of the pre-crisis peak. The cost of starter homes is too high for many aspiring homeowners with the median sales price for new homes at $337,000, in part because of the upward spiraling cost of building materials and labor.”
“Local governments should look where they can to provide assistance or actual housing for the under-served,” Hamrick added. “The upward move in mortgage interest rates, with further upward moves expected, adds further to the challenges associated with housing affordability.”
“Reduction of regulations combined with tax incentives could help alleviate some of these negative forces as would better and more consistent wage gains for prospective homebuyers.”
What can agents do?
In the meantime, Hamrick said real estate agents should focus on educating buyers and sellers about personal finances, keeping them abreast of local market factors and maintaining transparency throughout the transaction.
“Whether serving buyers or sellers, agents would do well to be aggressive in a constructive way with their communication, in terms of keeping them apprised of developments in the purchase process, including when challenges arise but also when things appear to be going smoothly,” he told Inman.
“Ideally, prospective buyers should seek to be pre-approved for a mortgage to eliminate negative surprises while also addressing early the question of how much home they can afford. These are things an agent can help encourage.”